'The Fed has gone crazy' with interest rate hikes

Cornelia Mascio
Ottobre 11, 2018

President Trump renewed his criticism of the Federal Reserve last night, saying that the central bank was raising interest rates "too fast".

Ahead of a campaign rally for the United States mid-term elections next month, Trump told reporters: "I think the Fed is making a mistake". "They're so tight. I think the Fed has gone insane", Trump said.

"It's a correction that we've been waiting for for a long time", he said of the more than 800-point drop. "But I really disagree with what the fed is doing. OK?"

'As stocks go up, tech goes up more than the stock market.

The 10-year Treasury yield rose to 3.22 percent from 3.20 percent late Tuesday after earlier touching 3.24 percent. "But I think the Fed has gone insane", he went on.

US stocks took their worst loss in eight months Wednesday, with the Dow Jones Industrial Average sinking 831 points and the Nasdaq composite logging its biggest loss in more than two years. The S&P 500 was down 3.3 percent, and the Nasdaq saw losses of 4.1 percent.

The 10-year yield is now 3.20 percent, the highest in than seven years and up sharply form 2.82 percent in late August.

"The markets are fraught with peril", warned Stephen Innes, head of trading at OANDA, adding there was a "horrible intersection of risk aversion" from the US-China trade conflict and rising US interest rates.

The markets have been on a historic climb - with the Dow and S&P each notching dozens of new highs since 2016 - buoyed by a strong USA economy and solid corporate earnings. The Fed has predicted that unemployment will remain below 4 percent through 2020 and inflation is expected to track around 2 percent, conditions that Federal Reserve chief Jerome Powell called "remarkably positive".

Powell's goal is to extend the second-longest US economic expansion on record by moving interest rates up just quickly enough to prevent overheating, but not so rapidly that the central bank chokes off growth.

The selloff came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.

The Fed has been raising interest rates gradually since December 2015, and last month lifted its target for short-term rates to a range of 2 per cent to 2.25 per cent, responding to an economy that has been growing at a pace well above what Fed officials believe is sustainable. Tiffany plunged 10.2 percent to $110.38 and Ralph Lauren fell 8.4 percent to $116.96.

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