When the Fed raised interest rates, the Trump administration was very critical of the move.
Now, White House Trade Adviser Peter Navarro is blaming the most recent Dow Jones selloff on the Federal Reserve’s volatility, according to Fox News.
The Inverted Yield Curve
According to Navarro, the interest rates here in the United States are far higher than the rest of the world. Even so, the Fed has raised that rate recently.
Navarro believes the Fed will have to make a correction very soon, possibly by as much as 0.75%.
“It gives the Federal Reserve even more reason to immediately lower interest rates by 50 basis points and another 25 or 50 before the holidays,” Navarro said of the stocks plummet. “This is what everybody on Wall Street, except the Fed, believes should be happening now.”
The rising interest rates, according to Navarro, are also the cause of the inverted yield curve. This is reflected in the spread of two-year and 10-year yields.
Traditionally, when this happens, a recession comes within 24 months. Indeed, the last time this happened was in 2007, which led to the recession experienced in 2008 that led to massive layoffs and dug this country into a huge hole due to all the Obama bailouts and special programs.
Economy Still Solid
Even with a historical trend that has held true for five decades, Navarro thinks this administration will beat the odds. After the big selloff, the Dow recovered somewhat, and the Dow was up during the early trading hours on Thursday.
President Donald Trump also announced he was going to back off the proposed tariffs on China, which Navarro said will benefit Americans during their Christmas shopping.
He also said that the Fed is not only facing pressure from the administration to get the federal interest rates back in line, but also from Wall Street.
The economy is a hallmark of the Trump administration and the backbone of Trump’s 2020 presidential campaign. If we do hit a recession prior to Election Day, most believe it would ensure that Trump is not elected.
Considering that the Fed is independent of the White House, there are already conspiracy theories spinning that allege that the Fed is purposely trying to create a recession to ruin Trump’s chances of being re-elected. Whom do you believe?