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Ex-Wells Fargo Chief Executive: If the Fed abandons interest rate hikes in December, it will crush | 18.11.18



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The US Federal Reserve is in a dilemma: The US economy is creating a firm impression, further interest rate hikes are likely to be seen in relation to this background. But the monetary authorities have a prominent opponent with President Donald Trump. Now an expert warns the Fed to yield to the pressure of the White House.

Four cuts in Fed rates have signaled the Federal Reserve for 2018. Monetary authorities have already raised interest rates three times this year, the last in September by 25 basis points. The next interest rate increase is expected to close on December 19, while market participants expect an increase of 25 basis points.

Bend the carers of coins Donald Trump;

According to US President Donald Trump, this assumption will not happen in December. On several occasions, the White House's first man strongly criticized the US monetary authorities for their interest rate policy over the last few months. That was "a mistake," he said. "I think the Fed is crazy," said the American president recently to reporters. Confirmed in his opinion, Trump saw himself as a US stock market as a result of recent increase interest rates had clearly yielded.

The head of former Wells Fargo Dick Kovacevich now warns that he can not put pressure on the US president. If monetary authorities move away from their plans to further raise interest rates and raise interest rates in December, it could "lead to chaos in the stock market," CNBC said. If interest rates do not rise, markets will collapse because it would seem that the central bank "delivers the president," warned Kovacevich.

The Fed's independence must remain inviolable

The expert referred to the role of guards in a functioning economy: "The independence of the Federal Reserve is essential to any market economy, and if ever challenged, the market will be very negative," Contovice said in a stock market turmoil.

In this context, Wells Fargo's former boss also targeted the US president himself and accused him of not understanding the market connections. "What he does not understand is that the more he tries to influence the Fed with public statements, the less likely it is to influence the Fed, because the Fed must remain independent and independent."

Meanwhile, Kovacevich asserts to the lawyers themselves that they are doing a good job. "Because we have a very strong economy and low unemployment and relatively low inflation," Fed does not have to continue to relax monetary policy in order to function. Instead, the central bank has to reach a neutral interest rate, which in its opinion varies between 3 and 3.5%, the former bank manager continued.

Economists contradict the chariot

Other parties also criticize Trump's allegations that currency watchers should not continue to raise US interest rates. Recently, the head of the International Monetary Fund IVW, Christina LagardeOn this issue, Trump was open to criticizing his attack on the Federal Reserve. Central banks will have to make their decisions on interest rates according to economic indicators, the financial expert said at the opening of the IMF and World Bank annual meeting. At times where growth is strong and unemployment is extremely low, central banks will have to "make the decisions they make," said the French.

And Fed Chairman Jerome Powell stressed that after the recent interest rate step, "political factors or the like" did not play a role in monetary policy decisions. Instead, Powell Trump criticized the US-China trade dispute and warned of the consequences for the US economy if the escalation of the conflict led to a much more protective world.

Authors finanzen.ch

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