The American president Donald Trump has unleashed hard at the president of the American central bank. He is mad at Jerome Powell because he refuses to fulfill his wishes. In a message Trump asks US companies to leave China.
Who is the bigger adversary, Fed Chairman Jerome Powell or Chinese President Xi Jinping? Trump asked this question in a tweet this afternoon, in response to a Powell speech earlier in the day. He was clearly not satisfied with the outcome of the consultation of the American central bankers.
Like every year, bankers met in the mountain village of Jackson Hole to discuss Federal Reserve policies. Investors in every corner of the globe have been looking forward to Powell’s closing speech this week.
Trump demands stimulation
It was expected that Powell, nominated by Trump in 2017, would announce a relaxation of monetary policy. That was what the president was hoping for. Trump believes the Fed should be “proactive” in stimulating the US economy.
Prior to the speech, the Chinese government had further increased the pressure on Powell by announcing new import taxes on products from the United States with a total value of $ 75 billion.
Powell did not allow himself to be lured out of the tent and announced no interest rate cut.
Powell stays calm
The US economy is still performing well, the Fed reasons. While companies make slightly less investment and industry growth has slowed down somewhat, the number of jobs is on the rise and wages are rising.
He did say that the Fed will act ‘appropriately’ to hold on to current growth rates. He warned of a trade war that got out of hand. It will cause more damage to the economy than the Fed can compensate with monetary policy, Powell said.
A barrage of tweets
Trump was not convinced. “As usual, the Fed does nothing,” he frowned on Twitter. “We have a very strong dollar and a very weak Fed. I will do ‘brilliant’ work with both, and the US will do a fantastic job,” said the president.
In the series of tweets that followed, Trump announced that today he is coming with a response to Chinese import tariffs. He already gave his followers a taste: “American companies are summoned to look for an alternative to China,” he wrote.
American entrepreneurs must bring their companies and production capacity back to the US, Trump wrote, without making clear how he will enforce that.
Wall Street in the red
On Wall Street, investors are now processing the cocktail of Chinese trade measures, the speech by Jerome Powell and the response from Donald Trump. The preliminary conclusion: bad news. The most important indices – the Dow Jones, the S&P 500 and the Nasdaq – are roughly 2 percent in the red.
Nicholas de Krammer, а self-taught economic analytic with heave mathematical background. Math behind the economics (and economics behind math) is the strong side of the author. Contact him at [email protected]