Trump says Fed ‘making a big mistake’ by being too aggressive

The Dow took a beating Wednesday

International Monetary Fund managing director Christine Lagarde said she "would not associate" Federal Reserve Chairman Jerome Powell "with craziness" after US President Donald Trump commented that the central bank, which has been raising US interest rates, had "gone insane", CNBC reported on Thursday.

Trump this week has blamed the market's big sell-off on the Fed's interest rate increases, saying "the Fed is out of control".

In a brief interaction with reporters and later in comments to Fox News, Trump said the USA central bank was "too aggressive" in raising interest rates.

The rise in longer-term interest rates is driven mainly not by a rise in inflation expectations, but rather by a rise in investors' expectations for what the Fed will do and for how much compensation bond investors are demanding in lending over long time horizons. The Fed is an independent body and presidents in recent decades have avoided commenting publicly on its actions.

While acknowledging that higher rates helped savers, he criticised the Federal Reserve's moves. "I think our nominees have been absolutely first rate".

"The Fed is making a mistake", he told reporters on Wednesday as he arrived in Pennsylvania for a campaign rally.

"I think a lot of presidents have been frustrated by the Fed, they just in recent years haven't said so in public", David Wessel of the Washington-based Brookings Institution told AFP.

While the attention of investors was riveted by the sharp selloff in stocks earlier this week, another key turn in financial markets is worth paying attention to: The spike in bond yields.

Stocks have their worst day in months; Dow drops 800-plus points
Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks. The two-year yield rose to 2.88 percent from 2.87 percent, and the 30-year yield climbed to 3.38 percent from 3.37 percent.

Mr Summers cautioned Mr Trump against criticising the Fed, saying it might have the opposite effect.

But the Federal Reserve has been gradually raising its interest rates since 2015, bringing the target for its benchmark rate to a range of 2% to 2.25% last month.

A neutral rate enables economic growth without the risk of significant inflation.

"And we have interest rates going up at a clip that's much faster than certainly a lot of people, including myself, would have anticipated", the United States president said.

By historic standards, interest rates remain low.

Just as the economy hits these bumps, the boost to growth from the giant tax cuts Trump enacted last December and additional government spending approved this year is expected to fade.

The rise in interest rates is "a sign of economic health, that is something to be welcome and not feared", Kudlow said on CNBC. "But I really disagree with what the Fed is doing, okay?" he said. While he was generally upbeat about the U.S. economy, predicting that the good news could continue "effectively indefinitely", when asked on October 3, 2018, what keeps him up at night, Powell said, "Basically everything". By law a president can only fire a Fed chair for cause, not a disagreement in policy. President Jimmy Carter in 1979 removed G. William Miller as Fed chairman by offering him the job of Treasury secretary.

But a fall would be a concern to the president, who frequently cites stock market performance as a sign of his administration's success. "The Fed is going wild", Trump said on an interview with Fox News Thursday. Economic experts are split on how long the strong economy will continue, and some investors are convinced that a number of stocks - particularly technology companies - are overpriced and were due for a slide.

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