Fed 'Boneheads' Need to Try Negative Interest Rates

Cornelia Mascio
Settembre 12, 2019

President Donald Trump urged the Federal Reserve to lower interest rates to a level typically reserved for recessions or periods of persistently weak growth, suggesting that such a setting could allow the government to refinance Treasury debt at a lower cost.

"The USA should always be paying the ... lowest rate". Trump has been pressuring Fed chairman Jerome Powell to drop rates to zero. Poll has a margin of error of 3.5 percentage points. What if a recession hits with rates already at or near zero, and should the Fed go with negative rates?

"People [would be] taking on more risk than they would otherwise because money is even cheaper", Luschini said. The rate now is in a range of 2% to 2.25%.

The Washington Post, citing public filings and financial experts, reported last month that Trump could also personally save millions of dollars a year in interest if the Fed lowers rates, given the outstanding loans on his hotels and resorts.

The US president called the Fed's rate-setters "boneheads" in another online barrage targeting its policymakers, warning they are missing out on "a once-in-a-lifetime opportunity". The Fed's benchmark rate is now 2%-2.25% following a quarter-point reduction on July 31 - the first cut since the Fed lowered rates effectively to zero in 2008, during the worst financial crisis and economic downturn since the Great Depression.

The Federal Open Market Committee is scheduled to meet again September 17-18, when it is projected to cut rates another 25 basis points (0.25%).

Regardless of Trump's name-calling, US Treasury Secretary Steven Mnuchin told reporters at the White House on Monday that he expected Powell's job was safe, despite months of speculation that the president could seek to oust him. He is apparently trying to put pressure on the Fed by calling for a large rate cut before a policy meeting next week.

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