Mnuchin plays down United States market swoon as global rout rolls on

Roman Schwartz
October 11, 2018

US President Donald Trump said yesterday's stock market selloff was in fact a long awaited "correction", and that the Federal Reserve, which has been raising US interest rates, has gone "crazy". "They're so tight. I think the Fed has gone insane", Trump told reporters on the tarmac in Pennsylvania.

Taiwan plunged almost 6%, with Seoul down 3% and Sydney and Singapore both falling 2% after US Donald Trump said the Federal Reserve had "gone crazy" with plans for higher interest rates. "It is doing well", Trump said. "The Fed is going loco and there's no reason for them to do it and I'm not happy about it".

During panel discussions at the International Monetary Fund's annual meetings in Bali, Indonesia on Thursday, South African Reserve Bank Governor Lesetja Kganyago stressed the importance of central bank independence when he was asked whether Trump's comments demean the integrity of the institutions. "We don't let other things distract us".

In July, the president complained about the Federal Reserve raising interest rates. Powell defended the Fed's plans to raise interest rates gradually in the coming months, saying it was appropriate policy in such "extraordinary" economic times.

He added later, "The problem, in my opinion, is Treasury's and the Fed".

She said in addition to rising interest rates, investors also fear that company profit margins will be squeezed by rising costs, including the price of oil.

"It seems like the Fed is continuing on the course that markets expect, to raise interest rates given the tight labour market", said Phillip Swagel, who was a top Treasury official during the George W. Bush administration.

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Trump's remarks to reporters were in direct response to questions about the stock market drop.

The steep drop in Asia followed Wednesday's plunge in NY, with the Dow Jones dropping almost 830 points - the biggest fall since February - after Trump's latest criticism of the Federal Reserve.

During an event earlier Wednesday amid the sell-off, Trump and his top economic adviser, Larry Kudlow, said they believed the USA economy was strong.

"I wonder today whether Trump really has some buyer's remorse with respect to selecting Powell as his Fed chairman, because that was a unusual pick", Moore said. "It's probably healthy. This will pass and the United States economy remains strong".

"No I think the Fed is making a mistake", he said. And tech stocks got hit particularly hard.

Last week's jump in yields followed strong United States data but many analysts have been anticipating a change in the dynamics in the bond market due to expectations that central banks in Europe and Japan will soon phase out bond-buying programmes.

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