Trump demands further rate cut as economy 'handcuffed' by Fed

Trump’s Real Target Is the Fed Not China

Yet despite 16.6% year-to-date gains for US stocks, GDP growth exceeding expectations at 2.1% in the second quarter and interest rates well below previous bull market peaks, the Fed opted to cut rates in July for the first time since 2008.

China's willingness to hold out for a deal was shown in their aggression with counteracting Trump's latest tariffs. Together the four chairs served 40 years at the position of Fed chair and were appointed and reappointed by both Democratic and Republican presidents. The Fed said the rate cut is in light of the implications of the global economic outlook and muted inflation pressure.

In an opinion piece published on The Wall Street Journal on Tuesday, Paul Volcker, Alan Greenspan, Ben Bernanke and Janet Yellen wrote that an economy is strongest and functions best when the central bank acts independently and relies exclusively on sound economic principles and data. "The damage from the trade war - the Fed can not completely undo that. It may have some modest effect, but it's not going to undo the damage of the trade war".

The White House has aggressively lobbied for more substantive cuts in interest rates as a way to encourage borrowing and investment to stimulate economic growth.

"That's worrisome, because it's not clear that the Fed can offset everything that the trade war does to damage the economy and there's room for error there", he said. Investors are now assuming another rate cut next month, followed by two more in the coming months. Instead, he acknowledged the challenges facing central bankers as a result of trade uncertainty.

The game of high stakes poker in the form of trade negotiations between the US and China could reach unforeseen heights.

Even as stocks and bond yields worldwide fell amid concern about Trump's escalating trade war with Beijing, he accused the USA central bank of being a bigger threat to the American economy than China. "And coming into question is the broader fundamental strength of economies around the world". Those countries are likely to feel the impact of a slowing Chinese economy and a decline in trade.

Trump's press for a weaker dollar comes as a so-called currency war has broken out globally as other nations also seek to weaken their currencies.

But, for now, the Fed chairman has tried to thread the needle by cautioning a wait-and-see approach as the situation evolves.

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