Guest post by Joe Hoft
President Trump is right. With Stocks at all-time highs and unemployment at 50-year lows, the Fed’s interest rate increases show a far-left liberal bias.
Right after Barack Obama was elected President, on December 16, 2008, the Federal Reserve (The Fed) lowered the Fed Funds rate by an entire percent, from 1% down to 0% . The Fed had not lowered the Fed Funds rate by such a large amount (1% ) since at least before 1990, if ever. The Fed kept this 0% rate for most of Obama’s eight years in office.
CNBC reported in December 2015 that President Obama oversaw “seven years of the most accommodative monetary policy in U.S. history” (from the Fed). The Fed Funds rate was at zero for most of Obama’s time in office. Finally, in December 2015 after the Fed announced its first increase in the Fed Funds rate during the Obama Presidency.
The only Fed Funds Rate increases since 2015 were after President Trump was elected President. The Fed increased the Fed Funds Rate now seven times.
The Fed Funds Rate greatly impacts the economy:
Lower interest rates usually spur the economy by making corporate and consumer borrowing easier. Higher interest rates are intended to slow down the economy by making borrowing harder.
Increases in the Fed Funds Rate increase the cost of borrowing and the largest borrower in the world is the US government. With $20 trillion in debt, a 2% increase in interest payments equals $400 billion in annual interest payment increases or nearly a half a trillion dollars!
President Obama benefited from the lowest possible interest rates possible for seven of his eight years and in spite of this, nearly doubled the US Debt from $10 trillion to nearly $20 trillion. With no rate increases in interest rates, President Trump would arguably have a balanced budget to date. (Although the short term implications may not dictate this, the long term implications are clear.)
President Trump knows this and he previously stated that he is not happy with the Fed raising interest rates and killing the economy.
President Donald Trump said he’s not happy with the raising of interest rates by the Federal Reserve and suggested the central bank is working at cross purposes with his administration’s economic program.
In an interview published on CNBC, Trump said he wasn’t thrilled with the Fed’s rate hikes — despite calling Jerome Powell, whom he picked to replace Janet Yellen, a “good man” — and said he didn’t care that he was breaking a precedent under which presidents do not comment on the Fed so as to safeguard its independence.
“So somebody would say, ‘Oh, maybe you shouldn’t say that as president. I couldn’t care less what they say, because my views haven’t changed,” Trump said.
Second-quarter GDP is estimated to run at an annual rate north of 4%.
“Because we go up and every time you go up they want to raise rates again. I don’t really — I am not happy about it. But at the same time I’m letting them do what they feel is best.” He added, “But I don’t like all of this work that goes into doing what we’re doing.”
“I don’t like all of this work that we’re putting into this economy and then I see rates going up,” Trump said.
Now again this week with the DOW reaching all-time highs, consumer confidence at all time highs and unemployment at its lowest rate in 50 years, the Fed announced they will be raising rates some more!
The Fed’s Jerome Powell said at a meeting in Boston –
Federal Reserve Chairman Jerome Powell said Tuesday he sees no need to drop the central bank’s current gradual approach to raising interest rates.
Powell said the combination of steady, low inflation and very low unemployment shows the country is going through “extraordinary times.”
The markets almost immediately responded and in spite of the great news on the stock markets and jobs, the markets declined. Another Trump rally – another Fed interest rate block!