Federal Reserve ‘out of control’, says Donald Trump

Gladys Abbott
October 12, 2018

Gold prices rose Thursday as global stock sell-off and softer dollar led investors to seek a safe haven in the metal.

Analysts attribute some of the recent share price declines to sales by investors anxious that trade tensions will hurt growth, while trade tariffs and rising interest rates raise costs for businesses.

As of 3:18 p.m. ET, The Dow Jones Industrial Average fell 1.05 per cent or 268 points to 25,277.22, while the S&P 500 index was off 1.07 per cent or 31 points, at 25,277.22.

Forecasters with Macroeconomic Advisers left their outlook for annualized gross domestic product growth unchanged at 3.7 percent for the third quarter and 2.6 percent for the fourth quarter.

Spot gold climbed 0.8 percent to reach $1,203.30 an ounce by 0947 GMT. This was the biggest fall in the USA markets in over eight months.

To the extent that financial markets are rational in the short term - they are rational in the long term - having long-term Treasury rates rise make sense to me.

This is in sync with Japan's Nikkei that declined by 3.41 per cent, Hong Kong's Hang Seng by 3.53 per cent, Singapore exchange by 2.64 per cent and the Korean Kospi plunged by 2.28 per cent today.

In the USA, banks and health care companies are taking some of the worst losses while technology companies are slightly higher after a series of big losses.

Bond yields, which have spiked over the last week, slid after the Labor Department said consumer prices grew only slightly in September.

"I'm paying interest at a high rate because of our Fed", he added, referring to the cost of servicing the U.S. deficit.

US President Donald Trump has renewed his attacks on the central bank, the Federal Reserve, calling it "out of control" and "far too stringent". "I'd like our Fed to not be so aggressive because I think they're making a mistake".

If investors are on edge now because of this week's declines, they will be really rattled if the Fed lost its independence. But the logic behind the Fed policy is not founded on inflation. He didn't say anything remotely like that, ' he said on CNBC.

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"In the absence of a specific trigger, investors are now voting with their feet due to mounting concerns around trade tensions and the impact on global growth, higher interest rates in the USA, and a potential rotation away from equities due to rising bond yields", said Richard Hunter, head of markets at Interactive Investor.

"Later, White House Press Secretary Sarah Sanders said the fundamentals and the future of the United States economy remain incredibly strong".

Managing Director of International Monetary Fund (IMF) Christine Lagarde talks during a press conference ahead of the annual meetings of the IMF and World Bank in Bali, Indonesia on October 11, 2018.

"It is clearly a necessary development for economies that are showing much improved growth, with inflation picking up and unemployment being extremely low", she said.

"The markets are fraught with peril", warned Stephen Innes, head of trading at OANDA, adding there was a "horrible intersection of risk aversion" from the US-China trade conflict and rising US interest rates.

Carney also praised Fed Chairman Jerome Powell's technocratic expertise.

'It is a correction that I think it is caused by the Federal Reserve, with interest rates, ' Trump told reporters at the White House.

Ward McCarthy, chief financial economist at Jefferies LLC in NY, said Trump's comments wouldn't influence Fed policy making.

"They lived too well for too long and frankly I guess they think that the Americans are stupid people".

However, asked about the future of Fed Chair Jerome Powell, Trump said 'I'm not going to fire him'.

Trump has repeatedly touted the spate of Wall Street records as proof of the success of his economic program, including his confrontational trade strategy, and criticized the Fed for raising the benchmark interest rate - three times this year - saying it would undermines his efforts.

Other main European markets were down by similar levels.

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