U.S. President Donald Trump called on the Federal Reserve to push down interest rates into negative territory, a move reluctantly used by other world central banks to battle weak economic growth as it punishes savers and banks’ earnings in the process.
Trump, in a pair of Twitter posts, said negative rates would save the government money on its debt. He did not address the risks or financial market tensions that central banks in Europe and Japan have confronted as a result of their negative rate policy, or the larger issue that negative rates have not done much to boost growth or raise inflation as intended.
“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term,” Trump tweeted. “We have the great currency, power, and balance sheet... The USA should always be paying the ... lowest rate. No Inflation!”
“It is only the naïveté of (Fed Chairman) Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing,” added Trump, who has repeatedly noted that rates are negative in Germany, Europe’s trading powerhouse.
Last month, however, Trump told reporters at the White House that he did not want to see negative rates in the United States.
On Friday, Powell said the Fed would act appropriately to help maintain the U.S. economic expansion and that political factors played no role in the central bank’s decision-making process.
Trump also kept up his attack on Powell and the Fed in his tweets on Wednesday: “A once in a lifetime opportunity that we are missing because of ‘Boneheads.’”
Fed officials have downplayed the idea of setting their target policy rate below zero as politically untenable and not worth the risks. The policy is meant to account for extremely weak economic conditions by, in effect, charging banks to hold reserve deposits at the Fed.