After logging his obligatory daily attack on minorities, Donald Trump got around to pressuring the Fed ahead of this week’s crucial policy meeting at which the FOMC will almost surely decide to cut rates by 25bp.
It would be tempting to assert that the president piles extra pressure on the central bank in the days ahead of rate decisions, but that probably wouldn’t be accurate – Trump tweets about the Fed incessantly irrespective of whether a policy meeting is just around the corner.
But this week is obviously a big deal, as a rate cut would be the first since the crisis response and according to some, will likely mark the beginning of an easing cycle designed to cushion the domestic economy from weakness abroad and help alleviate some of the uncertainty fostered by the administration’s combative trade policies.
Read more: What To Expect From The Fed At The July Meeting And Press Conference
Frustrated and clearly angry after a weekend spent sparring with Twitter critics and feuding with the city of Baltimore, Trump struck a fatalistic tone on Monday with regard to the prospects of the Fed helping him fight the trade war.
“The EU and China will further lower interest rates and pump money into their systems, making it much easier for their manufacturers to sell product”, Trump lamented.
Last week, new language in the ECB statement confirmed that the details around rate cuts, tiering, more forward guidance enhancements and a possible restart to net asset purchases, are currently being hashed out ahead of an assumed September rollout for a new easing package. In June, Trump derided “Mario D.” on Twitter after Draghi’s comments in Sintra telegraphed an imminent resumption of policy easing across the pond.
On Monday, Trump was quick to remind everyone that there’s no inflation. “In the meantime, and with very low inflation, our Fed does nothing”, he said, disgusted.
If you were wondering what the president sees for this week’s Fed meeting, the answer is that Trump thinks the Fed will “probably do very little by comparison” to the ECB and the PBoC.
That, Trump shouted into the digital void, is “Too bad!”
Shortly thereafter, he added the following:
The Fed “raised” way too early and way too much. Their quantitative tightening was another big mistake. While our Country is doing very well, the potential wealth creation that was missed, especially when measured against our debt, is staggering. We are competing with other. ….countries that know how to play the game against the U.S. That’s actually why the E.U. was formed….and for China, until now, the U.S. has been “easy pickens.” The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!
Clearly, a 25bp insurance cut will not ensure Jerome Powell remains secure in the chairmanship.
So, get ready Jim Bullard – it will soon be time for you to do your patriotic duty by assuming Jay’s soon-to-be vacant position and immediately cutting rates to negative 60bp.
Read more: Jim Bullard Says He Wants Jay Powell’s Job
Never let it be lost on you that the Fed would have a much easier time “matching” the ECB if Trump would simply avoid tweeting about monetary policy. In June, former Vice Chair Stanley Fischer suggested that had Trump not weighed in so frequently late last year, the December rate hike might not have happened.
It is becoming harder and way more foolish to assume that all this chaos is simply about a quarter or half point move in short term rates…The way this plays in the MSM is that all of this can be resolved by Monetary policy or just adding more debt to our overburdened Camel. The reality is that sins of the past regarding financial discipline are coming home to roost in the form of deflationary forces and probably a severe recession..Like a spring flood of fairly high standard deviation it will prove Cathartic. If a War can be avoided …..well then …we may all be winners when the sun rises at the end of this cycle….
I’d love to see the Fed give Trump the middle finger and just hold rates.