The US Federal Reserve is the “only problem” for the U.S. economy according to the President Donald Trump even as a rout in stock markets was resulted partly because of the disagreement between the president and the Fed.
Reports of Trump considering firing of the Fed Chairman Jerome Powell, the shutdown of the US government and a slowing US economy resulted in the markets sliding again on Monday.
Concerns of weak economic growth has in recent months caused the US equity markets to drop sharply and the S&P 500 index is set to record its biggest drop in value for December since the Great Depression.
The responsibility for economic headwinds was laid firmly at the feet of the central bank by Trump in a tweet which furthered the concerns in the market on Monday.
“The only problem our economy has is the Fed. They don’t have a feel for the market,” Trump said on Twitter. “The Fed is like a powerful golfer who can’t score because he has no touch – he can’t putt!”
Throughout the year, Trump has been criticising the raising of interest rates by the Fed
The US Treasury Department said that a phone call with top U.S. regulators to discuss financial markets was arranged by the Trump administration on Monday. The phone meeting was held between the Treasury Secretary Steven Mnuchin and the Working Group on Financial Markets set up by the president which is known as the “Plunge Protection team.”
According to a report in Bloomberg News, the market regulators reportedly told Mnuchin that nothing is out of the ordinary in the markets. The Treasury said that Munchin was assured on Sunday by major US banks that they were still in a position to make loans.
All the 11 major S&P 500 sectors were lower, and all the 30 components of the Dow Industrials were in the red.
There were also concerns in the market over the partial government shutdown which was initiated on Saturday because of a lack of a decision in the Congress about granting money to the President to build his promised border wall with Mexico. Investors were also unsettled by the resignation of Defense Secretary Jim Mattis’ on Thursday over Trump’s decision to call back U.S. troops out of Syria.
Nick Bennenbroek, currency strategist at Wells Fargo in New York, wrote in a note to clients that the statement by Mnuchin on Sunday related to the discussion that he had with the banks and about the plans to convene the so-called Plunge Protection team “was not especially comforting, however, given that investors had not generally been questioning market functioning in recent days, despite large declines.”
The setting up of the so called Working Group was done in March 1988 when the US administration was still trying to find out the reason behind the “Black Monday” stock market crash of October 1987.
The team was also convened during the 2007-09 financial crisis.
(Adopted from Reuters.com)