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President Trump again attacked the Federal Reserve on Thursday after the European Central Bank lowered rates deeper into negative territory.
The president said the Fed should cut rates to zero or less in order to keep borrowing costs down in the long run.
"They are trying and succeeding in depreciating the euro against the very strong dollar, which is hurting US exports. And the Fed sits, sits and sits. They are paid to borrow money, while we pay interest! ", Tweeted Trump.
Although negative interest rates may seem like a good idea, some money experts believe that there is a dark side to politics, which has produced mixed results elsewhere. The combination of the reluctance of European banks to reduce their deposit rates below zero and a flat yield curve has reduced their profits.
"As a highly indebted real estate developer, Trump is pondering negative rates from a borrower's perspective, but the lukewarm appetite of the Fed for negative rates is partly explained by the fact that officials know that this could lead to a failure of savers and drag the central bank into a political maelstrom. ", Wrote the chief economist of Capital Economics, Paul Ashworth, in a note sent Wednesday to his clients.
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Peter Navarro, director of policy at the Trade and Manufacturing Bureau, confirmed Thursday Trump's view that the Fed should at least match what is happening in Europe.
"It's a chess match," he told "Morning with Maria." "Fed is playing checkers in a world of chess, you have to watch what the Europeans have just done, you have to match that and start the game again."
HI's comments came a day after Trump called the Fed "boneheads" not to take advantage of a "unique opportunity" to lock rates to extremely low levels.
JPMorgan CEO Jamie Dimon said he was not thrilled by the negative interest rate outlook when he discussed the idea Tuesday at a conference in New York. He added that he thought the rates this year would be "up but not downward" and that his bank had begun to "think about how to prepare" for negative rates if the Fed was heading into this direction.
"Obviously, you have to worry about the long-term effect of these interest rates," Dimon said. "But it's difficult, there are companies that do not affect at all, and there are companies where it just sinks and you can do very little."
The idea of lowering rates below zero is also inappropriate for Danielle DiMartino Booth, a former advisor to the Dallas Fed.
"Our banking system has created credits to help US businesses grow, to help American families buy a home," said DiMartino Booth, former Dallas Fed adviser, Varney & Co.
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"And if the banking system was disrupted by negative interest rates, it could not lend as it does today. According to President Trump, "we are an indebted country," and if you impose negative interest rates in this country, you will put an economy built on debt and erase its skates. It's the worst idea, the most anti-American I've ever heard, "she said.
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