US President Donald Trump is not pleased with the dollar’s strength, blaming the Federal Reserve Chairman Jerome Powell for too aggressive regulator’s position on the monetary policy, calling him a man who loves hiking the interest rates. Tight financial conditions caused an additional demand for the greenback in the foreign exchange market, adding more headache to the government debt funding. The US economy is still doing well, despite too hawkish Fed’s comments, Trump said last Saturday during his speech in Conservative Political Action Conference in Maryland.
“I want the dollar to be strong but I also want the currency to be useful for our country”, - Trump said, noticing that a high level of the exchange rate hurts the United States to make business with other countries. Trump did not call Powell’s name but he mentioned ‘a gentleman from the Federal Reserve, whole likes hiking the interest rates’, and who loves ‘quantitative tightening’ and ‘too strong dollar’.
“Just imagine what would have happened if we left the interest rates where they were before if we did not use the quantitative tightening”, - Trump said, adding that the US dollar would have been much cheaper in that case. According to Trump, the US economy is experiencing an unprecedented boom, while other countries struggle from many difficulties, which slows the US down.
Those words do not have any economic or monetary background, as Powell already did his best to calm the markets down, announcing a round of the wait-and-see position by the regulator. Moreover, the market players started even pricing in a rate cut by the Fed this year, instead of two hikes, according to previous expectations. An assumption of leaving the interest rates at previous levels is also completely incorrect just because the inflation pressure would have soared in that case, causing several bubbles and potential hard-landing scenario for economic growth. Yes, the tax reform made its positive effect on the corporative sector, as companies increased the capital expenditure dramatically. However, that decision was also doubtful as there are not many examples in history when stimulative measures are made in a cycle of economic growth.