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Trump Tweets at FED to Cut Interest Rates

Trump Tweets at FED to Cut Interest Rates

Federal Reserve Board Chair Jerome Powell speaks at a news conference following a two-day meeting of the Federal Open Market Committee, Wednesday, May 1, 2019, in Washington.

He added that U.S. central bankers are "comfortable" about policy at the moment. That is an improvement from the view Fed officials took after their March meeting, when they noted that "the growth of economic activity had slowed from its solid rate in the fourth quarter".

The Fed declared that the economy is advancing at a "solid" rate overall, but it also observed that household spending and business investment decelerated in the first quarter, and inflation is now "running below" its 2 per cent target.

"We don't see any evidence at all of overheating", Powell said in response to a Yahoo Finance question about whether or not stronger GDP readings in 2019 would point to a hot USA economy.

"What was news to me was the emphasis on transitory factors holding back inflation", said Michael Gapen, chief US economist at Barclays Plc.

The Fed says said inflation was a factor in its decision to freeze rates where they are.

"If the inflation were to run persistently below 2 percent or persistently above 2 percent that would be a concern for the committee and the committee would take that into account in making policy", he explained.

"Powell tried to temper expectations for a preemptive cut in rates tied to inflation". Leading economic adviser Larry Kudlow too has lent his support for this move in the past, urging Fed to cut interest rates by 0.5 percent. The IOER rate gives the Fed an additional tool for the conduct of monetary policy.

"We think our policy stance is appropriate at the moment". "We of course will be watching very carefully to see that that is the case".

The economy expanded at a 3.2 per cent annualized pace from January to March, boosted by exports and inventories growth. It was the best performance for a first quarter in four years, and it surpassed initial forecasts that annual growth could be as weak as 1% at the start of the year.




Growth, however, was accompanied by weak inflation. The Fed's preferred price gauge climbed just 1.5 per cent in March from a year earlier, well below the central bank's 2 per cent target.

The dollar index drifted around 97.600 against its set of major currency peers after going as high as 97.728 and hovering around $1.1211 to the euro and $1.30 to Britain's pound with the Bank of England set to keep its rates on hold later. Republicans in Congress surely share the president's desire to avoid a recession, but they're also wary of a politicized Fed, which Trump surely would not hesitate to continue to pressure to cut rates even if that meant spiking inflation.

"China is adding great stimulus to its economy while at the same time keeping interest rates low", he wrote on April 30. He repeatedly highlighted individual price declines that could prove transitory and, in doing so, pushed back against some market hopes the Fed might be preparing to lower interest rates later this year.

"We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing", he continued.

Following weak leads from the U.S., the Australian share market looks set to open lower this morning.

The five Fed governors also voted unanimously to cut the rate paid to banks on excess reserves, which are those not required to meet regulatory requirements based on deposits, from 2.4 percent to 2.35 percent.

The Fed has seen that the USA economy is slowing down but it is still strong and it has no worries about it to figure it out in its economic assessment.

On Wednesday, "we learned that an insurance cut is not imminent", said Julia Coronado, founder of MacroPolicy Perspectives LLC, a NY economics advisory firm.

Higher interest rates increase the opportunity cost of holding non-yielding bullion and can boost the U.S. dollar, making gold costlier for investors holding other currencies. By moving interest rate targets up or down, the Fed aims to keep the economy in balance, achieve maximum employment, and maintain stable prices. It is not the first time that Trump has asked the Federal Reserve for lower interest rates, which makes the cost of borrowing cheaper and tends to encourage consumers and businesses to spend and invest.

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