WASHINGTON – U.S. President Donald Trump once again lashed out at the Federal Reserve on Tuesday, this time in the wake of weak data on the manufacturing sector, saying the central bank has kept interest rates “too high” and that a strong dollar is hurting U.S. factories.
“As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!” Trump wrote.
Trump’s comments came on the heels of a report from the Institute for Supply Management on Tuesday showing U.S. manufacturing activity plunged to its weakest level in a decade last month, amid concerns about the trajectory of the U.S.-China trade war.
ISM said comments from manufacturers “reflect a continuing decrease in business confidence,” and also noted that “global trade remains the most significant issue,” suggesting Trump’s hard-line approach to trade is a bigger worry for them than U.S. interest rates or dollar strength.
Trump has been relentless in criticizing the Fed and Jerome Powell, whom he appointed to head the central bank, for the relatively high level of U.S. interest rates compared with other developed countries. Central banks in Europe and Japan have pushed their own interest rates below zero in a bid to boost their struggling economies.
The Fed, after lifting rates nine times over three years through the end of 2018, reversed course this year and has cut borrowing costs twice — in July and again last month. The Fed’s key overnight lending rate is now set in a range of 1.75 percent to 2.00 percent, half a percentage point below its recent peak.
But the gulf between U.S. rates and those in Europe and Japan remains very wide, which is among the chief reasons behind the dollar’s strength. Earlier on Tuesday, the U.S. dollar index was at its highest in more than two years, although it has retreated sharply in the aftermath of the ISM data.
While Trump wants even more rate cuts from the Fed, it’s not clear he will get them anytime soon. Since cutting rates in mid-September, the second of what Powell has described as a “mid-cycle adjustment” to policy, a number of Fed officials have voiced support for holding still for now unless the incoming data grows demonstrably worse.
Chicago Fed President Charles Evans, speaking in Frankfurt on Tuesday, said the U.S. central bank can keep rates as they are for now. Evans was among those who voted in favor of the rate cuts in July and September.
The Fed is due to release its own figures on U.S. manufacturing output for September on Oct. 17.