Investment guru Ron Insana says Federal Reserve Chairman Jerome Powell may face a no-win test on Friday when he speaks at the central bank’s annual symposium in Jackson Hole, Wyo.
“It may be a test Powell can not survive,” Insana wrote for CNBC.
Powell on Friday is expected to offer further clarity for market participants as bond yields have plunged since the July meeting and the 2-year/10-year yield curve inverted, signaling that a recession is likely in one to two years.
President Trump called on Powell to lower interest rates by a full percentage point, a dramatic move normally reserved for an emergency.
“Indeed, the last time the Fed cut rates by that much was in late 2008, lowering them all the way to zero at the very depths of the Great Financial Crisis. The U.S. faces no such crisis now,” the author of four books on Wall Street said.
“The president, himself, has declared the U.S. economy to be the strongest in the history of the United States, suggesting that the media and others are conspiring to paint a picture of anything but such a rosy scenario,” the CNBC and MSNBC contributor wrote.
“The president has rejected the notion, accepted by most credible economists and business leaders, that his trade war with China is weakening not just China, but global manufacturing and, potentially, U.S. economic growth in the relatively near future,” Insana wrote.
For his part, Trump on Wednesday continued to pressure the Federal Reserve and the central bank’s chairman to lower interest rates, saying the central bank hiked rates "too fast" and has let the nation down as a result.
“The Federal Reserve has let us down,” Trump told reporters outside the White House, adding that the nation’s central bank should “get smart and reduce interest rates like many other places around the world that we have to compete with.”
The comments by Trump, who has repeatedly criticized the Fed’s policies, come as he seeks to downplay worries that a trade war between the United States and China could weigh on the U.S. economy and trigger a possible recession before the November 2020 presidential election.
Trump said the U.S. economy “is the strongest in the world, by far nothing even close and a lot of good things are happening. We had some very good retail numbers this morning.”
Wall Street’s main indexes rose about 1% on Wednesday, as upbeat earnings from retailers Lowe’s and Target reinforced confidence in consumer demand, while investors awaited the release of the Fed minutes for further clues on the path of interest rate cuts.
Big-box retailer Target Corp (TGT.N) surged 19.5%, set for its biggest one-day percentage jump, after it raised its annual earnings forecast. Home improvement chain Lowe’s Cos Inc (LOW.N) climbed 9.8% as it joined bigger rival Home Depot Inc (HD.N) in beating profit estimates, Reuters explained.
The reports come on the heels of solid earnings from Walmart Inc (WMT.N) and strong retail sales data last week that allayed fears of a U.S. recession.
Trump denied he is demanding that Fed Chief Jerome Powell cut rates once again.
“I don't demand it, but if he used his head, he would lower them,” Trump said.
Trump said “in Germany, they have a zero interest rate, and we do compete with Germany,” although Trump said the U.S. is “much stronger” than Germany.
“If you look at what's happening around the world, Jay Powell and the Federal Reserve have totally missed the call. I was right. And just about everybody admits that I was right. He did quantitative tightening. He shouldn't have done that. He raised interest rates too fast, too furious and we have a normalized rate.”
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