Those who approach monetary policy from a free market perspective mistrust-and see as inherently artificial and manipulative-using Federal Reserve interest rate policy to satisfy short-term political goals.
Donald Trump has urged the US Federal Reserve to slash interest rates to zero or even into negative territory as he lashed out ahead of the central bank's crucial decision next week.
President Donald Trump urged the Federal Reserve to lower interest rates to a level typically reserved for recessions or periods of persistently weak growth, suggesting that such a setting could allow the government to restructure Treasury debt at a lower cost. The Fed's benchmark rate is now 2%-2.25% following a quarter-point reduction on July 31 - the first cut since the Fed lowered rates effectively to zero in 2008, during the worst financial crisis and economic downturn since the Great Depression.
"Although U.S. inflation numbers have tended to be slightly below 2 percent", Selgin adds, "'slightly' is the operative word. Policymakers are unlikely to cut to the extent the White House wants, since interest rates are already low by historical standards.
President Trump continued his long-running critique of the Federal Reserve Wednesday in a series of tweets blasting his own hand-picked chair, Jerome Powell, and the rest of the "Boneheads" there who, he said, need to be slashing interest rates below zero-a far cry from the comparatively moderate rate cuts he's previously called for. "Some are pointing to Japan as a country that's had large deficit spending and aggressive monetary stimulus for decades without a breakout of price inflation", Murphy says.
Policy makers are widely expected to make another quarter-point cut when they next meet September 17-18, though hardly anyone sees interest rates headed to zero in the next two years, according to a Bloomberg survey earlier this month. Trump has pushed to bring the rate down to be more in line with that of other nations, which have interest rates of nearly zero percent.