US President Donald Trump on Wednesday stepped his pressure on the Federal Reserve to slash interest rates to zero “or less,” in a new appeal for negative yields that he believes would help the U.S. curb its borrowing costs and stimulate growth.
Via Twitter, the president continued his campaign of lashing out at the Fed’s monetary policy. With the world economy sandbagged by the downside risks of the U.S.-China trade war, Trump called the central bank “boneheads” for missing out on “a once in a lifetime opportunity” presented by historically low yields.
The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet…..
— Donald J. Trump (@realDonaldTrump) September 11, 2019
….The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads.”
— Donald J. Trump (@realDonaldTrump) September 11, 2019
Trump reiterated his frustrations with Fed Chairman Jerome Powell, who he believes has not been aggressive enough in easing monetary policy in the face of a global slowdown.
Negative-yielding global debt, currently estimated at $16 trillion, is bad for savers and bank profits, but makes the risk of default virtually nil.
It also underscored the president’s growing fascination with negative rates, a condition where investors have sacrificed yield for safety by paying the bond issuer.
“Specifically as a mercantilst, Trump is focused on bilateral trade balances and U.S. exports…which he seems to think frustrate improvement” of the economy, said Marc Chandler, chief market strategist at Bannockburn Global Forex.
As yields on safe-haven government debt collapse globally — largely because of fears over the economy and expected central bank easing — borrowing costs have dropped sharply.
In fact, the Congressional Budget Office said last month that the federal government’s savings on borrowing costs translated into a $1.1 trillion net reduction in the CBO’s projections over the following 10 years, even as deficit spending surges.
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