CNBC's Jim Cramer wonders whether Federal Reserve Chairman Jerome Powell is trying to sabotage President Donald Trump's economic strategy.
"Maybe he wants Trump to lose," Cramer pondered on CNBC.
Cramer said the only thing that can stop the market's recent plunge is the Fed changing course on interest rates or Trump ending his tariffs on China.
"My main fear is that we could have a mini version of 2008 if the Fed doesn't change course," the "Mad Money" host said Monday night. "If Fed chief Jerome Powell actually starts listening to the stock market and wakes up to the damage that [Trump's] tariffs can do to the economy, then maybe he'll shift gears, just like [then-Fed Chairman Alan Greenspan] did in '98."
If Powell halts his rate hikes then "we can bottom and even roar higher" in the stock market, Cramer said. "But as long as Powell stays committed to the December hike and three more next year ... and the president stays committed to expanding his tariffs, then history says we've got more downside no matter what."
Both Powell and Trump need to change course but "neither is likely to occur," Cramer said, adding "higher rates and higher [trade] taxes are setting us up for a very difficult end of the year, not to mention 2019."
Trump recently said he won’t fire Powell but blamed an “out of control” U.S. central bank for the worst stock market sell-off since February.
Trump also told reporters that he knows monetary policy better than the Fed’s leaders and continued criticizing them for interest-rate increases, Bloomberg reported.
“The Fed is out of control,” Trump said. “I think what they’re doing is wrong.”
The president added that the Fed’s interest rate increases are “not necessary in my opinion and I think I know about it better than they do."
“I’m not going to fire him,” Trump said of Powell, a Trump appointee who legally can only be fired for cause. “I’m just disappointed at the clip. I think it’s far too fast, far too rigid.”
The president has been publicly criticizing the central bank since July for interest-rate increases and declared he was “not happy” in September after the third rate hike of the year.
Most economists consider a reputation for independence essential for maintaining a central bank’s credibility with investors that it will guard against inflation.
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