President Donald Trump is calling for the Federal Reserve to bring interest rates to zero or below.
The Federal exists outside of political pressure, and Trump’s attempt to pressure the Fed is unprecedented. Trump expressed his desire for lower rates through twitter. He called Jerome Powell, chairman of the Fed, naïve.
Powell cut rates by a quarter point in July and is likely to do so again during the upcoming policy meeting on September 17-18. Powell has emphasized that the recent cut is a result of a “mid-cycle adjustment” and not because of political pressure.
Growth for the global economy has weakened given the continued escalation of the trade war with China. Trump is asking for the Fed to pursue measures that are typically reserved as courses for action during the height of a recession. Trump has asked the Fed to begin buying back bonds in order to decrease the cost of long-term borrowing.
However, other countries are experiencing negative yields and negative interest rates. Germany, France and the Netherlands have yields that are negative. But, the Fed did not employ negative rates during the last recession.