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Economic Review: Trump vs Federal Reserves

President Donald Trump and The Federal Reserves Governor Jerome Powell - Photo by Getty Images

JAKARTA (TheInsiderStories) American dollar (US$) weaken after President Donald Trump slapped the Federal Reserves (the Fed) planned to raise again its benchmark rate in September. He said the Fed should do more to help boost the economy.

Reuters reported on Wednesday (22/08), the US dollar index of six other major currencies showed a decline of 0.1 percent to a level of 95.186 after a day earlier slumped 0.7 percent.

So far, The US central bank has raised the Fed Fund Rate (FFR) twice this year. At present, the benchmark interest rate is at the level of 1.75 percent to -2 percent.

Last July, the Federal Open Market Committee (FOMC) indicates to raise its benchmark again after maintained its monetary stance from a previous month. The board reported hat the labor market has continued to strengthen and that economic activity has been rising at a strong rate.

“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly,” the board said in written statement on August 1.

FOMC reported on a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability. The board expects that further gradual increases in the target range for the FFR will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation over the medium term.

“Risks to the economic outlook appear roughly balanced,” said them.

To be fair, some of Trump’s criticisms is make sense for us. A rising interest rate could be counterproductive to Trump’s trade war policy and to help the US’ economy. Trump said he had been hoping for easier monetary policy from the Fed.
Given his current trade initiatives, Trump is worried that the rate hikes will strengthen the dollar and cause larger trade deficits at a time when his using tariffs as a weapon to attempt his opposite countries like China and Russia.
In addition, rising rates can curb consumer spending. On the other hand, the Fed has a reason on the monetary stance is to stabilize the economy and prevent the economy from overheating. The rate hikes also to response to robust US’ economic growth.
Email: linda.silaen@theinsiderstories.com