Fed Warns White House to Cool Down the Trade War
The President has tweeted disapprovingly about the Fed more than 30 times since the Fed cut rates in July. On Twitter Wednesday, Trump Mr. Powell had “no ‘guts,’ no sense.”
As is his way the Fed Chairman largely ignored the Presidents comments and sent his own message. He is concern that recent market turmoil and a swift decline in long-term bond yields last month were a result of investors worries that the U.S.-China trade war was hurting business confidence and capital.
Trade developments have been “up and down and then up, I guess—or back up, perhaps—over the course of this intermeeting period,” Mr. Powell said Wednesday. “In any case, they’ve been quite volatile.”
Mr. Powell mentioned trade 20 times other risks figured less prominently or not at all in his public address. Mr. Powell mentioned Brexit once, and the tensions in Hong Kong and Saudi Arabia didn’t come up.
“The thing we can’t address, really, is what businesses would like, which is a settled road map for international trade. We can’t do that. We don’t have that tool,” Mr. Powell said. “But we do have a very powerful tool which can counteract weakness to some extent by supporting demand through sound monetary policy.”
In an interview Thursday on the Fox Business Network, White House economic adviser Lawrence Kudlow said the Fed’s recent move was a “step in the right direction.” He added, “They probably have more work to do…and I reckon they’ll probably get there.”
Mr. Powell said he didn’t mean to suggest the Fed’s tools haven’t had any effect and reinforced how raising interest rates at the start of the year to holding them steady during the spring to cutting them this summer helped keep the economic outlook favorable.
“We do have a very powerful tool which can counteract weakness to some extent,” Mr. Powell said. He added: “I was pointing out that there is a piece of this that we really can’t address.”