Donald Trump. Picture: AFP/NICHOLAS KAMM
Donald Trump. Picture: AFP/NICHOLAS KAMM

Washington — US President Donald Trump once again attacked the US Federal Reserve on Thursday, calling for more interest rate cuts to stimulate the American economy just days before the key policy meeting.

“The Federal Reserve is derelict in its duties if it doesn’t lower the Rate and even, ideally, stimulate,” he said on Twitter, a relatively mild epithet after calling policy makers “boneheads” and “pathetic”. Trump has long argued that the Fed was too aggressive about raising the benchmark borrowing rate in 2018, which it did four times that year.

Under Fed chair Jerome Powell, the Fed has cut the rate twice in 2019 and could do so again next week at its two-day meeting, although some economists are calling for a pause.

Trump’s blitz of insults and criticism directed at the Fed had slowed in recent weeks, with the most recent occurring two weeks ago when he said US central bankers “don’t have a clue but I do”. “Take a look around the World at our competitors. Germany and others are actually GETTING PAID to borrow money. Fed was way too fast to raise, and way too slow to cut!” Trump tweeted on Thursday, pausing in his focus on the impeachment inquiry against him in the US Congress.

The European Central Bank (ECB) left its policy interest rate unchanged on Thursday at -0.5%, while the Bank of Japan — also set to meet next week — has a -0.1% rate as sluggish economic growth persists.

Meanwhile, official government data and industry reports are giving mixed signals about the US economy. Sales of US manufactured goods had a dismal September, hit hard by Boeing’s woes and a protracted work stoppage at General Motors (GM), the commerce department reported. Total new orders fell 1.1% in September to $248.2bn.

The result meant 2019 so far has been a year to forget, with sales in the first nine months of the year 0.8% lower than the same period in 2018.

Poor sales and GM’s strike

The largest part of the damage last month was done by the transportation sector, with vehicles and parts falling 1.6% and civilian aircraft falling another 11.8%, extending August’s decline.

New home sales also declined, falling 0.7% but they are up 15.5% compared to September 2018, according to a separate report on Thursday. Amid rising wages, low interest rates and historically low unemployment, new home sales forged higher in June, July and August.

However, the far larger market for existing homes also fell in September, according to industry data released earlier this week.

Scarce labour, high costs for materials in part due to tariffs, and fear that Trump’s trade wars could scare off would-be buyers had previously made some homebuilders reluctant or unable to add to the supplies.

Economist Yelena Maleyev, of GrantThornton, noted that home prices are rising due to high demand and low supply. “Manufacturing counties, most of which are concentrated in the Midwest, have been hardest hit by the trade war and, more recently, the GM strike; those losses are spilling into the housing market,” she said in an analysis.

“Housing activity is expected to contribute to overall GDP for the first time in more than a year and a half in the third quarter, but only modestly.”

Meanwhile, manufacturing, including car building, has been in steady decline. And though it is a much smaller share of the US economy than services, it has been the sector Trump promised to help with his aggressive tariff strategy.


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