Fed should cut rates to zero or less

Fed should cut rates to zero or less

Fed should cut rates to zero or less

President Donald Trump continued assailing the Federal Reserve on Wednesday in a trio of tweets, saying the "USA should always be paying the lowest rate" and we are missing the opportunity of a lifetime because of the "Boneheads" at the U.S. central bank. There are also questions over whether the Federal Reserve Act even allows it to deploy negative rates. His comments come at a time when it is widely expected that the Federal Reserve will again cut rates in its September 17-18 policy meeting.

Powell has indicated the possibility of more cuts to prevent the economy from slowing down, but has stressed that the Fed does not consider political factors in deciding on monetary policy. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.

Lower interest rates are generally reserved for when the economy is in or nearing a recession, which makes the president's repeated calls for such low rates now particularly unusual.

The Fed cut the benchmark interest rate in July for the first time in more than a decade, partly as insurance against the impact of trade uncertainties on the economy.

While perhaps appropriate in recessionary conditions, rates at or below zero in a growing economy with record-low unemployment "may ultimately create the next financial crisis", said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

Fed officials balked at cutting rates below zero during the last downturn in part because of fears doing so would hamper money-market functioning and hurt rather than help banks.

A recent study published by the University of Bath found negative rates decreased lending.

"We have the great currency, power, and balance sheet", Mr Trump said in announcing that the "Federal Reserve should get our interest rates down to ZERO, or less".

-With assistance from Rich Miller.