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Trump calls the Fed ‘stubborn child’ in its refusal to cut rates

Expectations are growing that the Fed is on a course to cut as soon as its July 30-31 gathering.

Bloomberg|
Jun 25, 2019, 10.15 AM IST
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President Donald Trump accused the Federal Reserve of behaving like a “stubborn child” in refusing to cut interest rates as he attacked the central bank again for keeping credit too tight.

“Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!,” the president said in a tweet on Monday.

Trump has spent months criticizing Fed Chairman Jerome Powell for raising interest rates last year -- in Trump's view -- too far and too fast. In his latest tweet, Trump reiterated his belief that if the US central bank would cut interest rates, the economy would be stronger.

At the Fed's policy meeting last week, officials decided to leave interest rates unchanged but they opened the door to a cut.

Trump criticized European Central Bank President Mario Draghi in a June 18 tweet after Draghi signaled more monetary stimulus may be on the way for the euro area. Trump said that would make it “unfairly easier for them to compete against the USA. They have been getting away with this for years, along with China and others.”

Expectations are growing that the Fed is on a course to cut as soon as its July 30-31 gathering.

Trump's pressure on Powell intensified this month. Bloomberg reported last week that the president believes he has the authority to replace Powell as Fed chairman, demoting him to the level of board governor.

Powell was resolute on Wednesday in a press conference after the central bank's policy meeting, saying: “I have a four-year term, and I fully intend to serve it.”

In a NBC interview aired Sunday, Trump denied that he'd threatened to demote Powell but said he'd “be able to do that if I wanted.”

The Federal Reserve Act provides explicit protection for Fed governors against removal by the president except “for cause.” Courts have interpreted the phrase to require proof of some form of legal misconduct or neglect of basic duties. A disagreement over monetary policy wouldn't meet that bar.

It's less clear, however, whether the president can demote a chair, removing him or her from the top position while leaving the person as a Fed governor.
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