Winston-Salem Journal (NC) December 26, 2018
President Donald Trump lashed out at the Federal Reserve
while administration officials try to assure the public and financial markets
that Jerome Powell's job as Fed chairman was safe.
"The only problem our economy has is the Fed,"
the president tweeted Monday. "They don't have a feel for the Market, they
don't understand necessary Trade Wars or Strong Dollars or even Democrat
Shutdowns over Borders. The Fed is like a powerful golfer who can't score
because he has no touch - he can't putt!"
On Wall Street, stocks had already been down but
intensified their fall after Trump's tweet. The major indexes on Wall Street
fell another 2 percent Monday, making it very possible that the market will end
this month as the worst December for stocks since 1931.
The S&P 500 index slid 65.52 points, or 2.7 percent,
to 2,351.10. The Dow Jones Industrial Average sank 653.17 points, or 2.9
percent, to 21,792.20. The Nasdaq skidded 140.08 points, or 2.2 percent, to
6,192.92.
Technology stocks, health care companies and banks took
some of the heaviest losses in Monday's sell-off.
Trump's latest tweet attacking the Fed was met with
concern that any effort to diminish Powell or remove him as chairman could
destabilize the economy.
"He is seeking open warfare on Christmas Eve,"
said Peter Conti-Brown, a financial historian at the Wharton School of the
University of Pennsylvania.
"We've never seen anything like this full-blown and
full-frontal assault. This is a disaster for the Fed, a disaster for the
president and a disaster for the economy."
The president has expressed frustration over the Fed's
decision to raise its key short-term rate four times this year. Those moves are
intended to prevent the economy from overheating at a time of brisk growth and
an unemployment rate near a half-century low.
At a news conference last week, Powell explained that the
rate hikes were evidence of the economy's strength. But Trump sees the
increases - which lead to higher borrowing costs for consumers and businesses -
as an economic and political threat.
The president's attacks are widely seen as an intrusion on
the political independence of the Fed, which exists to determine the flow of
money based off economic data on employment and inflation.
Fed independence has long been among the bedrocks of the
U.S. financial markets.
It ensures that central bankers can make politically
unpopular decisions, such as fighting high inflation in the 1980s or rescuing
banks after the 2008 financial crisis.
Stocks did decline after Powell announced this year's
fourth rate hike on Wednesday. But the sell-off appeared to reflect concerns
that the Fed might be moving too fast in its plans to raise rates and to shrink
its vast portfolio of bonds given an economic slowdown that is expected in
2019.
Fed officials voted unanimously to increase rates last
week. Among those voting with Powell were three other board members who were
chosen by Trump: Richard Clarida, Randal Quarles and Michelle Bowman.
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