Donald Trump expressed confidence in the treasury secretary, Federal Reserve and US economy on Tuesday, moving to calm financial markets further roiled after the report that the president had discussed firing the central bank’s chairman over raising interest rates.
Trump, asked if he has confidence in treasury secretary Steven Mnuchin, said, “Yes I do, very talented guy, very smart person.” Asked about Fed chairman Jerome Powell, Trump said the central bank is “raising interest rates too fast” but he has “confidence” that the Fed will “get it pretty soon.”
The dollar rose and US equity futures advanced on Wednesday after a volatile start as investors assessed the comments. Futures on the S&P 500 Index jumped 0.7 per cent, the first advance for futures in two weeks and the largest climb in more than three weeks.
The president — answering reporters’ questions at the White House after addressing US armed forces members on a Christmas Day video conference call — said that the Fed was hiking borrowing costs because the “economy is doing so well,” adding that US companies were having “record kinds of numbers” and it’s a “trem-endous opportunity to buy.”
The remarks represent Trump’s first expression of public support for Mnuchin and Powell since people familiar with the matter told last week that the president had discussed dismissing the Fed chief, who was recommended by Mnuchin. Before Tuesday’s comments, one person familiar with the president’s thinking said that Trump had also weighed dismissing Mnu-chin, while another said that Mnuchin’s tenure may depend in part on how much markets continue to drop.
Trump’s frustration with Mnuchin is rising after his attempts to calm Wall Street failed, a news channel reported, citing a source close to the White Hou-se, who said that the treasury secretary could be in “serious jeopardy” with the president.
The S&P 500 stock index tumbled 2.7 per cent on Monday in its worst-ever trading session before the Christmas holiday. Further declines in stock futures on Wednesday in Asia suggested that the benchmark for American equities were nearing a bear market until they turned around as US markets were poised to open.
As stocks rose for most of Trump’s first two years in office, the president frequently pointed to the gains as a sign of his success. Since they began falling, he’s often blamed the Fed and its interest-rate hikes, even though investors are becoming increasingly concerned about the impact of the administration’s trade battles with China and Europe.
Trump’s Oval Office remarks on Tuesday contrasted with a tweet on Monday saying that “the only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders.”
One reason stocks have been declining is because of the partial US government shutdown over Trump’s demand for billions of dollars for a wall on the Mexican border, his top campaign promise. On that issue, Trump gave little ground on Tuesday, saying that the agencies won’t reopen “until we have a wall, a fence, whatever they’d like to call it.”
Trump’s comments on Mnuchin followed the secretary’s convening of an emergency meeting with top US financial regulators on Monday, following a call with executives from six major banks the previous day. The treasury department issued a statement on Sunday saying banks have adequate liquidity for lending, surprising investors who didn’t know that might be an issue.
The president’s remarks on the Fed could potentially alleviate concern that Trump would try to remove Powell, even if the president didn’t explicitly say that he won’t fire the central bank chief. Mnuchin said in a pair of tweets on Saturday evening that he’d spoken with the president about the matter, and he quoted Trump saying he didn’t believe he had the authority to remove the Fed chairman. “Well, we’ll see,” Trump said on Tuesday when asked about his confidence in Powell. “They’re raising interest rates too fast. That’s my opinion. But I certainly have confidence. But I think it will straighten. They’re raising interest rates too fast because they think the economy is so good. But I think that they will get it pretty soon. I really do. I mean, the fact is that the economy is doing so well that they raised interest rates and that is a form of safety in a way.”
Trump’s comment about safety may be a reference to the idea that higher interest rates would give the Fed more room to cut in order to cushion the economy in case of a downturn.