President Donald Trump has long been critical of the Federal Reserve and the manner in which it manages the country’s economy and monetary supply, particularly with regard to its review and determination of interest rates.
Perhaps Trump’s repeated criticism may have finally had an impact, as it was announced on Tuesday that the Fed would cut interest rates for the first time in over a decade, with the last reduction having occurred prior to the start of the 2008 recession.
Fed cuts benchmark rate
Fox Business reported that word of a potential Fed cut to interest rates leaked out prior to the official announcement Tuesday afternoon, and those leaks ultimately proved correct as the benchmark federal funds rate was reduced by a quarter of a percentage point, bringing it from 2.25-2.5% down to 2-2.25%.
The idea behind the rate cut is to protect and continue the strong growth seen in recent years by stimulating the economy with increased borrowing and spending by businesses and consumers.
“The next question is going to be: will there be any further cuts after this?” Josh Wright, a former Fed staffer turned chief economist at iCIMS, told Fox Business ahead of the rate cut. “I think certainly these numbers will make it very easy to say one and done. We feel good about it now, and now we need to let this one cut seep through, so you’re going to let that feed through, barring any major developments.”
Trump wants more
President Trump will undoubtedly be pleased to see the rate cut from the Fed — though he likely was hoping for a cut larger than just a quarter-point — as he has viewed the intermittent rate increases from the Fed over the past couple of years as a stumbling block that unnecessarily slowed economic growth more than it should have.
Speaking with reporters at the White House on Monday, and asked about the prospective rate cut, Trump said: “The Fed moved, in my opinion, far too early and far too severely. It puts me at a — somewhat of a disadvantage. Fortunately, I’ve made the economy so strong that nothing is going to stop us. But the Fed could have made it a lot easier.”
“I would like to see a large cut, and I’d like to see immediately the quantitative tightening stopped,” he added in reference to efforts at decreasing the monetary supply in circulation. “It should be stopped. For them to have done quantitative tightening and also higher interest rates simultaneously, I think, was a big mistake.”
The president went on to suggest that, had the Fed not raised rates as much as they had, the stock market could very well be 10,000 points higher and the Gross Domestic Product (GDP) growth rate could have been in the four percent range, rather than the two to three percent range.
President optimistic on economy
Those remarks to supporters echoed what Trump said in a pair of tweets on Sunday, in which he wrote, “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.”
He added: “The Fed has made all of the wrong moves. A small rate cut is not enough, but we will win anyway!”
As of now, the president has yet to weigh in with any fresh commentary with respect to the Fed’s rate cut, but it likely won’t be long before he has something to say about it and what could mean in terms of the continued growth and strength of the U.S. economy.