Photo: Reuters/Carlos Barria
Photo: Reuters / Carlos Barria

US President Donald Trump on Tuesday said the Federal Reserve should cut interest rates by a full percentage point, while at the same time resume purchases of bonds, moves he said would help the country “go up like a rocket.”

The call for dramatic stimulus measures comes on the heels of a strong first-quarter economic growth number released on Friday that blew away economist estimates, and on the same day that Fed policymakers begin a two-day meeting in Washington.

Despite the strong economic data, Trump suggested in a tweet that “wonderfully low inflation” provided room for the Fed to juice the economy more, something he said China was already doing with great success.

“China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening,” Trump wrote.

“We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!” he proclaimed.

Trump has been a vocal proponent of looser policy, leading some critics to say he is encroaching on the Fed’s independence.

After the GDP data released on Friday, White House economic adviser Larry Kudlow was quick to say that an interest-rate cut might be on its way.

“Actually, by the Fed’s own measure, the PCE deflator for inflation has dropped from 2.2% last summer to 1.4% this winter. Even according to the Fed’s own spokespeople – from the chairman on down – that could open the door to a target rate reduction in the months ahead,” Kudlow said in an interview with CNBC.

“The Fed is independent, I’m just expressing my own view, the president just happens to agree with that view,” he added.

Analysts expect that Fed officials will not signal any urgency to follow Trump’s advice when they announce policy decisions on Wednesday afternoon.

Leave a comment

Your email address will not be published. Required fields are marked *