Trump, in a pair of Twitter posts, said negative rates would save the government money on its debt. He did not address the risks or financial market tensions that central banks in Europe and Japan have confronted as a result of their negative rate policy, or the larger issue that negative rates have not done much to boost growth or raise inflation as intended.
"The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term," Trump tweeted."We have the great currency, power, and balance sheet ... The USA should always be paying the ... lowest rate. No Inflation!"
Last month, however, Trump told reporters at the White House that he did not want to see negative rates in the United States.
On Friday, Powell said the Fed would act appropriately to help maintain the U.S. economic expansion and that political factors played no role in the central bank's decision-making process.
Despite Trump's name-calling, US Treasury Secretary Steve Mnuchin told reporters at the White House on Monday he expected Powell's job was safe, despite months of speculation that the president could seek to oust him.
Fed officials have downplayed the idea of setting their target policy rate below zero as politically untenable and not worth the risks. The policy is meant to account for extremely weak economic conditions by, in effect, charging banks to hold reserve deposits at the Fed.
The yield on 10-year Treasury notes has collapsed by half in recent months to a near record low - a reflection of doubts about the global economy and the impact of Trump’s trade war as much as of Fed policy. Trump has cited the negative yield on Germany’s 10-year bond approvingly, but it is a product of an economy nearing or perhaps in recession.Read more: CNA
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