President Trump continued his assault on the Federal Reserve on Monday, blaming the central bank for reining in a United States economy that is on track to reach its longest expansion in history.
Mr. Trump, in a pair of tweets, said the economy and stock market would have been even stronger had the Fed kept interest rates low rather than raising rates four times in 2018.
“Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!,” Mr. Trump tweeted.
....Think of what it could have been if the Fed had gotten it right. Thousands of points higher on the Dow, and GDP in the 4’s or even 5’s. Now they stick, like a stubborn child, when we need rates cuts, & easing, to make up for what other countries are doing against us. Blew it!— Donald J. Trump (@realDonaldTrump) June 24, 2019
The president’s criticism of the Fed comes at an odd moment: As of July 1, the United States will have experienced the longest economic expansion on record, ten years and running. The unemployment rate is at its lowest level in nearly 50 years, and inflation — though quiescent — has at least gotten close to the central bank’s 2 percent goal. By lifting rates from near zero and shrinking the massive volume of government-backed bonds on its balance sheet, the central bank has bought itself precious space to fight the next economic downturn when it comes.
The Fed has already signaled that it is prepared to cut rates at its next meeting, with Fed Chairman Jerome H. Powell reiterating last week that officials will take steps to sustain the economic expansion.
Still, Mr. Trump continues to blame the Fed for not doing more sooner to goose an economy that, according to most metrics, was not in need of additional goosing.
First quarter growth came in at a solid 3.1 percent. The Dow Jones industrial average has been climbing steadily this month, buoyed in part by promises of coming Fed rate cuts, and output growth trackers suggest that the economy probably grew around 2 percent in the second quarter — roughly in-line with the rate that most economists think the United States can sustain, given its demographics and investment level.
Mr. Trump tweeted on Monday that the Fed “doesn’t know what it is doing,” and that without rate increases, the Dow Jones industrial average would be “thousands of points higher” and gross domestic product growth would be in the “4’s or even 5’s.”
The Fed lifted interest rates nine times between late 2015 and the end of last year, with four increases coming under Mr. Powell, whom Mr. Trump selected to lead the central bank. The tightening cycle was historically slow, as central bankers tested whether very-low unemployment would send inflation rocketing higher. It never did, and when the economy showed signs of cooling heading into 2019, the Fed stopped raising rates. It is now poised to cut them as global growth slows and inflation remains tepid.
Mr. Trump is correct that the Fed’s rate increases were meant to slow the economy. The central bank’s job is to keep growth on a stable glide path, sacrificing booms to fend off high inflation and job-costing busts. And it is also true that the central bank’s moves have been controversial at times. The Fed’s decision to raise rates for a final time last December, amid tight financial conditions and low inflation, drew criticism from economists and others across the political spectrum and spurred stock market turmoil.
“I don’t think the Fed can ever sit back on its achievements and feel comfortable,’’ said Mark Spindel, founder and chief investment officer at Potomac River Capital and the co-author of a book on politics and the Fed. “Trump is trying to foam the runway in case there is a slowdown.”
But most economists say the major risks to the expansion come not from the Fed but from Mr. Trump’s trade war with China and slowing global growth. Mr. Trump has slapped tariffs on $250 billion worth of Chinese goods and suggested he could tax all Chinese imports if a planned meeting with President Xi Jinping does not go well later this week.
The Fed itself is worried that trade woes, along with other factors, could weigh heavily on the economy and said at its meeting last week that it is open to cutting interest rates soon. If it does lower rates, it’s possible that it will also stop shrinking its swollen balance sheet, another policy Mr. Trump objects to regularly because he sees that as draining stimulus from the economy.
“Uncertainties surrounding the baseline outlook have clearly risen since our last meeting,” Mr. Powell said in his post-meeting news conference. “We will use our tools as appropriate to sustain the expansion.”
A growing number of officials project rate cuts this year, based on the release last week, and Mr. Powell said many of those who have not incorporated coming rate cuts into their baseline projections see them as increasingly likely. Following the announcement, investors have entirely priced in a cut in July and see the possibility for even lower rates come the Fed’s September meeting.
Even as the Fed leans toward doing precisely what Mr. Trump is urging, he has redoubled attacks on the central bank.
“What he’s done is he raised interest rates too fast,” Mr. Trump said in an NBC interview over the weekend. “I think the economy’s so strong we’re going to bull through it. But I’m not happy with his actions.”