President Donald Trump unleashed a torrent of criticism towards both the Federal Reserve and its Chairman, Jerome Powell, in an extraordinary interview with the Washington Post in which he accused the central bank of pushing U.S. stocks lower and triggering a decision by General Motors (GM) to close plants and fire thousands of workers.
Trump told the Post, in an interview published late Tuesday, that he wasn't "even a little bit happy with my selection" of Powell to head the Federal Reserve, adding that its current stance on interest rates was "way off base". Trump's remarks followed a similar interview with the Wall Street Journal in which he accused the central bank of being a "bigger problem than China" and comes just hours ahead of a key speech on monetary policy from Powell later today in New York.
"I'm doing deals, and I'm not being accommodated by the Fed," Trump told the Post. "They're making a mistake because I have a gut, and my gut tells me more sometimes than anybody else's brain can ever tell me."
The constant attacks on the Fed also come amid reports that Trump is unhappy with the performance of current Treasury Secretary Steve Mnuchin, whom he relied upon for advice when naming Powell to replace Janet Yellen earlier this year.
Meanwhile, Bloomberg reported that Mnuchin sought opinion from investors and bond traders over their preference for Fed tightening by faster sales of the Treasuries that sit on the Fed's $4.1 trillion balance sheet, as opposed to traditional hikes in the Fed Funds rate.
Selling more bonds than the currently-anticipated $50 billion each month would raise market rates, and drain liquidity from the economy, without the optics of rising base rates that could dampen consumer confidence and exaggerate weakness in the housing market.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, traded at an 18-month high of 97.50 Wednesday after Fed Vice Chair Richard Clarida appeared to cement the case for future rates hikes during a speech yesterday in New York.
"As the economy has moved to a neighborhood consistent with the Fed's dual-mandate objectives, risks have become more symmetric and less skewed to the downside than when the current rate cycle began three years ago," Clarida said. "Raising rates too quickly could unnecessarily shorten the economic expansion, while moving to slowing could result in rising inflation and inflation expectations down the road that could be costly to reverse."
Despite Trump's criticism, or perhaps in the wake of it, investors have also been trimming bets on 2019 rate hikes, according to data from the CME Group's FedWatch tool, which shows a 38% chance of a March increase, down from 43% in late October, and only a 16.5% chance that it would followed by a subsequent hike in June.
The S&P 500
Powell will speak today at the Economic Club of New York at noon eastern time.