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Executive Director Ex-Wells Fargo: If the Fed abandons price rise in December, it will collapse | 11/18/18



The US federal reserve is in a dilemma: the US economy makes a stable impression, a further increase in rates is likely in this background. But monetary authorities have an important opponent with President Donald Trump. Now an expert warns the Fed to bring pressure on the White House.

Four FED reserves have been lowered by the US Federal Reserve for 2018. Monetary authorities have already raised interest rates three times this year, most recently in September by 25 basis points. It is therefore expected that the next interest hike will be completed on 19 December, with market participants predicting an increase of an additional 25 basis points.

Bypass currency custodians Donald Trump?

According to US President Donald Trump, this case will not happen in December. For the first time in the White House, on several occasions in recent months, he has strongly criticized the US monetary authorities regarding interest rate policy. It was a "mistake", Trump said. "I think the Fed has waited crazy," the US president recently told reporters. According to him, Trump has emerged as the result of the recent introduction of the US equity market hike rate it obviously brought it.

Ex-Wells Fargo chief Dick Kovacevich now warns that he will not agree to pressure from the US president. If the monetary authorities withdrew from their plans for further rising interest rates and raised interest rates in December, this could "cause chaos on the stock market," the CNBC said. If the interest rates do not rise, the markets will collapse because it would appear that the central bank "puts the president in the hands," Kovacevich warned.

The independence of the Fed must remain inviolable

The expert took note of the role of currency supervisors in an operating economy: "The independence of the Federal Reserve is crucial for any market economy, and if ever it will become questionable, the market will be very negative," said Kovacevich Turbulenca on the stock exchange.

In this context, the former head of Wells Fargo also targeted the US president and accused him of not understanding market links. "What he does not understand is that he is trying to influence the public bank with public statements as much as possible, it is less likely to influence the Fed, because the Fed must remain independent and independent."

At that time Kovačevič himself confirmed to the currency administrators to do a good job. "Since we have a very strong economy and a low unemployment rate and relatively low inflation," the Fed must not continue with ease monetary policy for action. Instead, the central bank must reach a neutral rate, which, in its opinion, is between 3 and 3.5 percent, the former bank chief continued.

Economists oppose Trump

Other parties also criticize Trump's claims that currency monitors should not continue to increase US interest rates. Recently, the head of the International Monetary Fund IVW, Christine LagardeIn this regard, Trump was open to criticizing the attack on the federal reserve. Central banks should decide on interest rates according to economic indicators, said an economic expert at the opening of the annual meeting of the International Monetary Fund (IMF) and the World Bank. At a time when growth is strong and unemployment is extremely low, central banks should "take decisions", said a French woman.

And President of the Fed, Jerome Powell, stressed that the recent interest rate step, "political factors or the like," did not play any role in monetary policy decisions. Instead, Powell Trump himself criticized the trade dispute between the US and China and drew attention to the consequences for the US economy if the escalation of the dispute would lead to a more protectionist world.

Editors finanzen.ch

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