President Trump on Monday sought to play down the risk of a recession while also pinning the blame for a potential economic downturn on the Federal Reserve, chastising the central bank’s chairman, Jerome H. Powell, for a “horrendous lack of vision.”
“Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election,” Trump tweeted. “Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world.”
He then declared that interest rates, “over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well.”
“If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!” he said.
The Fed funds rate, which Trump is trying to tell central bankers to cut, is currently set at 2.25 percent. Slashing it 100 basis points would lower this rate to 1.25 percent, giving them very little additional wiggle room to maneuver if a full-fledged recession began.
His directive for them to launch a new phase of “quantitative easing” is shorthand for asking the Fed to pump more money into the economy, a step that could weaken the U.S. dollar. This is also seen as an extreme step that central bankers take when they are trying to urgently address a slumping economy, not a tactic that is employed when the economy is strong.
Fed officials have said they do not make decisions based on political pressure, but Trump has taken his attacks on the central bank to new extremes, particularly this month amid numerous signs that the U.S. economy is weakening more than expected.
After a tumultuous week in the markets suggested that the economy is heading onto shaky ground, Trump and his top officials have touted what they believe are the economy’s strengths, particularly consumer spending, to say that a recession will not occur.
As concerns mount, White House economic adviser Larry Kudlow has scheduled briefing calls this week with state and local business leaders.
White House spokesman Judd Deere said the calls, which “have been long-planned,” will focus on Trump’s economic agenda, including issues such as deregulation and energy production.
But even as the White House has dismissed the notion that the country may be headed toward a recession, Trump and his aides have given mixed messages.
In an exchange with reporters in Morristown, N.J., shortly before taking off for Washington on Sunday evening, Trump brushed aside the possibility of a downturn, saying, “I don’t see a recession.”
“I mean, the world is in a recession right now — although that’s too big a statement,” he added, in a remark that appeared to undercut his effort to calm fears.
Trump’s Twitter posts on Monday marked a new wrinkle in his push for the Fed to cut interest rates. In the past, he has said such a move is necessary to help the U.S. economy. But on Monday, he said it would be necessary to help the world economy. Other central banks, however, have already begun cutting interest rates, and it’s unclear why Trump believes that specific actions by the Fed would be enough to lift countries such as Germany out of a downturn.
Earlier Monday, White House counselor Kellyanne Conway ridiculed journalists for focusing on the issue.
“Of course, it’s nice to have the mainstream media finally covering the economy,” Conway said in an interview on “Fox & Friends.” “But they only cover it when they can use Sesame’s Grover word of the day: recession.”
She added that “the fundamentals are very strong,” a statement that prompted comparisons to a widely ridiculed claim made by the late senator John McCain (R-Ariz.) in September 2008 when the Wall Street collapse was well underway.
Commerce Secretary Wilbur Ross also sought to calm fears, but in the process, he acknowledged that a recession is possible at some point.
“Look, eventually there’ll be a recession, but this inversion is not as reliable in my view as people think,” Ross said Monday morning on Fox Business Network.
Ross was referring to the scenario in which interest rates on short-term bonds are higher than those paid by long-term bonds. Last week, the yield on the 10-year Treasury temporarily fell below the yield on the two-year Treasury for the first time since 2007. It later recovered slightly.
“Anything that takes 22 months to affect the economy — and in some cases, the inversion has taken that — that’s a long ways,” Ross said. “And a lot of the variables come in during a 22-month period. Beyond which, normally, inversions have occurred in the period of tightening money, tightening credit. And availability of credit is the biggest problem.”
Jonnelle Marte contributed to this report.