Donald Trump took a few minutes away from castigating “human scum” and building walls in “Colorado” to make some monetary policy “recommendations” ahead of next week’s Fed meeting.
The president long ago gave up on disguising his attempts to commandeer the central bank. He no longer even tries to couch his criticism in terms of an “opinion”. He now speaks as an autocrat would.
“The Federal Reserve is derelict in its duties if it doesn’t lower the Rate”, Trump said Thursday. Even the phrasing (“the Rate”) sounds like it was borrowed from Turkey’s Erdogan.
“Ideally”, Trump said, the Fed will “even stimulate”.
It wasn’t immediately clear what he meant by that. Cutting rates is stimulative.
The Fed of course began expanding its balance again this month, but the effort is aimed not at engineering a glut of reserves, compressing risk premia or otherwise stoking risk appetite. Rather, the aim is to replenish apparently “scarce” reserves and rebuild a buffer in the interest of averting the type of funding squeeze witnessed in September.
Trump has repeatedly insisted that the Fed should restart QE proper. He’s also explicitly called for negative rates on multiple occasions, even going so far as to say that Jerome Powell should cut rates below zero so that Steve Mnuchin can “refinance” the country’s debt.
Last month, Trump called the Fed a gang of “boneheads” in the course of demanding sub-zero rates.
“Take a look around the World at our competitors. Germany and others are actually GETTING PAID to borrow money”, the president reminded his 65 million Twitter followers on Thursday.
As ever, it’s important to remember that while couching things in terms of “competition” makes sense depending on the context, the incessant reference to Germany (and Europe more generally) as a nefarious foreign actor bent on undermining the American economy simply isn’t accurate.
“Fed was way too fast to raise, and way too slow to cut!”, Trump went on to shriek.
The Fed is, of course, expected to cut rates for a third time in as many meetings next week. Trump’s antics are a big reason why – and he knows it.