Trump: Fed is a bigger problem for economy than China

The central bank on Wednesday cut interest rates for the third time since July, but Powell signaled that it is done reducing borrowing costs for now, until there’s evidence the economy really needs yet another stimulus.

That angered Trump, who has loudly called for rates to drop to zero — or even lower — to boost the economy as he heads into his reelection campaign.

Trump’s missives on Thursday seemed to answer his own question from a couple of tweets in August. “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” he asked back then. (His tweet today downgraded Powell from “enemy” to “problem.”)

But rates are higher in the U.S. than in the European Union and Japan because the American economy is stronger. The Fed would be unlikely to cut rates to zero — an extreme stimulus measure — unless the economy were in serious trouble.

Most economists say Trump’s trade war with China — not high interest rates — is the main factor weighing on American manufacturing, one of the weakest areas of the economy, and is the chief source of the uncertainty that is slowing down business investment.

Borrowing costs are already ultralow, and leaders of top business groups say that hardly any of their members are having trouble getting loans. And while Trump is right that the dollar is strong — making American exports more expensive — that has much more to do with the relative health of the U.S. economy than with anything the central bank does.

The president regularly tweets about the central bank, some of which question the intelligence of Fed officials, who he has referred to as “boneheads,” and he has said that Powell has “no ‘guts.’”

For his part, the Fed chief has studiously avoided responding to the president in any fashion while underscoring the political independence of the Fed — intended to ensure the central bank acts in the long-term interest of the economy rather than short-term political interests.