United States President Donald Trump called for the Federal Reserve to maneuver interest rates to zero “or less” in a new bid to engineer negative yields that he claims will finally help the US stimulate growth by curbing borrowing costs.
With a tweet, as is par for course with this world leader, Trump continued his onslaught of the US central bank’s monetary policy. As the global economy continues to drag behind the US-China trade war, Trump called Fed officials “boneheads” who are missing out on a “once in a lifetime opportunity” that could present historically low yields.
Much of Trump’s disdain has been directed at Fed Chairman Jerome Powell. While this is nothing new, Trump reiterates that Powell has not been aggressive enough in his moves to ease monetary policy as we get closer and closer to a global economic shutdown.
Specifically, Trump tweeted, “The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet…”
Trump’s recommendation—near demand—for negative-yielding debt is not good for savers, nor bank profits. Currently valued at an estimated $16 trillion, though, moving into this territory could reduce risk of default to nearly non-existent. In addition—and, perhaps, more importantly—the latest barrage of tweets certainly highlights President Trump’s escalating fascination with negative Fed rates. This is a condition in which investors have historically sacrificed yield in order to ensure safety by paying the bond issuer.
Trump’s tweets continue, “…The USA should always be paying the lowest rate. No inflation! It is only the naivete of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads’.”