Published On: Fri, Oct 12th, 2018

Trump rages at ‘crazy’ US rate hikes as stock markets plunge again

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Donald Trump locked horns with the US central bank last night as he blamed it for sending global stock markets into a tailspin.

As a brutal share sell-off continued, the billionaire president said the Federal Reserve was ‘out of control’ and ‘making a big mistake’ by raising American interest rates.

He insisted that the plunge in share prices was nothing to do with his trade dispute with China, and blamed the Fed for hiking rates.

Donald Trump insisted that the plunge in share prices was nothing to do with his trade dispute with China, and blamed the Fed for hiking rates

Donald Trump insisted that the plunge in share prices was nothing to do with his trade dispute with China, and blamed the Fed for hiking rates

Donald Trump insisted that the plunge in share prices was nothing to do with his trade dispute with China, and blamed the Fed for hiking rates

‘I really disagree with what the Fed is doing,’ he said. ‘I’d like our Fed not to be so aggressive because I think they’re making a big mistake.’

He added: ‘The Fed is going loco. I think the Fed has gone crazy.’

His outburst came as stock markets around the world suffered another day of heavy losses. 

Following the rout on Wall Street on Wednesday night and in Asia yesterday, the FTSE 100 index fell another 138.81 points to 7006.93, taking losses since its all-time high in May to 11.3 per cent or £234billion.

In Europe, the main German benchmark was down 1.48 per cent while the French stock market fell 1.92 per cent, Italy was off 1.84 per cent and Spain dropped 1.69 per cent. 

In New York the Dow Jones Industrial Average fell another 257 points having shed 831.83 points on Wednesday in the third biggest fall on record.

Trump’s comments provoked a sharp reaction from Christine Lagarde, managing director of the International Monetary Fund, who defended Fed chairman Jay Powell, who was appointed by Trump.

‘I wouldn’t associate Jay Powell with craziness,’ she said on the fringes of the IMF annual meetings in Bali. 

‘He comes across – and members of his board – as extremely serious, solid and certainly keen to base their decisions on actual information.’

Lagarde said increases in interest rates in the US were ‘legitimate and necessary’ to keep a lid on inflation and stop the economy overheating.

Rate rises: Federal Bank chairman Jay Powell was appointed by Trump

Rate rises: Federal Bank chairman Jay Powell was appointed by Trump

Rate rises: Federal Bank chairman Jay Powell was appointed by Trump

Bank of England Governor Mark Carney said Powell was ‘very knowledgeable and he really understands the plumbing’ of the economy and financial system.

The stock market slump has been fuelled by concerns over Trump’s trade war with China and the prospect of higher interest rates in the US.

Worries about Brexit and a clash between Rome and Brussels over Italy’s spending plans have also hit confidence.

The Fed has raised rates eight times since late 2015, three times under Powell. Further hikes are expected this year and next.

The prospect of the era of easy money ending has seen borrowing costs rising and share prices falling. David Madden, an analyst at CMC Markets in London, said: ‘Trump can attack all he wants, but if the US economy continues to be strong, the Fed will likely keep hiking rates.’

Financial leaders from around the world gathered in Bali have been rattled. Lagarde refused to comment on the ups and downs but noted ‘US equity market and stock markets in general have been extremely high’.

She warned China and the US that if tensions worsen ‘the global economy could take a significant hit’. She said: ‘We need to de-escalate those tensions,’ adding, ten years after the financial crisis, that the world ‘is not safe enough’.

 

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