Trump Slams Fed's "Misguided" Tightening, Warns "Far More Costly" To Wait To Cut Rates

Members of the FOMC might be in their "quiet period" ahead of the July Fed meeting, where the board is expected to cut interest rates by at least 25 bp, but President Trump's attacks on the central bank continue.

In a series of tweets, Trump combines his criticisms of the central bank's "misguided" policy with accusations that other countries are manipulating their currencies and Trump warned that it would be "Far more costly" for the Fed to wait to cut interest rates should a downturn take place, than to cut now and prevent a downturn by being proactive.

In other words, Trump has basically strung together all of his prior criticisms of the Fed to remind policy makers with just over a week to go before their next policy meeting that he's expecting a cut.

Cuts

As we pointed out over the weekend, analysts at Morgan Stanley actually agree with Trump.

Will the Committee cut by 50bp all at once, or in a gradual fashion reminiscent of the recent tightening cycle? Morgan's  Matthew Hornbach asks.

In this regard, we note a deeply held view among monetary policy-makers that near the zero lower bound the Fed must act aggressively when low inflation or a downturn threatens. The message to policy-makers today? Don't keep your powder dry. In addition, our own simulations have shown that, in terms of a positive impact on the economy, 25bp in cuts is a rounding error, while 50bp might be enough to mitigate the downside risks we face today.

Cut

And the last three easing cycles all started with a 50 bp cut.