President Donald Trump is again ramping up criticism of the Federal Reserve and Chair Jerome Powell over monetary policy, saying the economy and stock market would be doing much better “if we had somebody different” leading the central bank.
Appearing in a recent interview with ABC News’ George Stephanopoulos, Trump said the U.S. GDP would be 1.5 percentage points higher had Powell and the Fed’s board of governors not enacted four rate increases during 2018 and continued with “quantitative tightening,” the reduction of its bond holdings.
He also said the market, most likely referencing the Dow Jones Industrial Average, would be 10,000 points higher than the 26,000-and-change it was trading at Friday morning.
“If he did nothing, or perhaps even loosened (quantitative easing), we would be in my opinion, just an opinion, 10,000 points higher than already a very high number,” Trump said. The number implies a potential 38% increase for a bluechip average, or about double the gain it already has seen since the November 2016 election.
Trump has been hammering on Powell for months to lower rates and restart quantitative easing, or QE, which was the most profound monetary experiment in the history of the world. QE became the new norm and it happened in three rounds between 2008 and 2014, quadrupling the monetary base of the world’s most dominant currency, the U.S. dollar from less than $1 trillion to more than $4 trillion.
The Fed simply printed new money, bought Treasury and mortgage-back debt from commercial banks, and in turn gave them new reserves of cash.
Trump appointed Powell to the position of Fed chair in 2018 and he has called for rate cuts a number of times, breaking from past norms when presidents refrained from taking on the Fed, at least in public because the central bank is supposed to work independent of politics.
The Fed had originally planned to raise rates two more times in 2019 before pivoting in January, signaling more “patience” and a willingness to help the market out when needed.
The Fed also reduced its balance sheet by about $600 billion, which Trump called “taking money out of the tills so that people can’t use it for doing what they’re doing.”
Trump said “it’s OK to raise interest rates a little bit,” but doing so now makes the country’s staggering $22 trillion national debt even more expensive to pay off. The national debt has increased 10.3% during Trump’s two-plus years in office after rising 88% under former President Barack Obama.