U.S. Retail Investors Are on Trump’s Side in Fight With Fed

Trump looks on as Jerome Powell his nominee to become chairman of the U.S. Federal Reserve speaks at the

"It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike", EFE news quoted Trump as saying in a tweet.

Only 11 percent of retail investors described the US economy as "booming", though 50 percent labeled it "solid", according to Wells Fargo.

Lawrence White, an economics professor at New York University's Stern School, said he expects the Fed to remain mindful of the mistakes of the 1970s, when officials allowed inflation to erupt, requiring sharply higher interest rates and a painful recession to root out. Interest rates that factor into mortgage rates have fallen over the past month, meaning that mortgage rates have also declined.

Policymakers at the US Federal Reserve are expected to raise interest rates this week.

At a critical juncture in the Fed's effort to prevent the economy from overheating, Trump is presenting the biggest presidential challenge to USA central bank independence in decades.

Analysts said they expect the Fed to move ahead with a rate rise at this week's meeting, but its plans for next year are less certain.

"So while I thought interest rates would keep rising and that would lessen demand for homes, we're actually seeing interest rates falling again and increasing the affordability of homes once more", he said.

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A dovish Fed that indicates an end to pre-ordained hikes and a switch to more dependence on economic data would go a long way to allaying concerns that the central bank will tighten the economy into a slowdown, according to Phil Camporeale, managing director of multi-asset solutions for J.P. Morgan Asset Management.

Fed Chairman Jerome Powell said in late November that interest rates were "just below" the broad range of estimates of the level that would be neutral for the economy. But while economists don't like Trump's Fed bashing, there are some who are starting to agree with the president that it's time for the Fed to hit pause on the rate hikes.

Some argue that the only impact Trump is having on the Fed is to make the central bank more likely to hike since the Fed doesn't want to appear to have lost its independence from politics.

Image copyright Reuters Image caption Mr Trump appointed Mr Powell as Fed chair past year.

The press conference with Mr Powell will be "particularly important", economists at Goldman Sachs said. "Not acceptable!" Trump tweeted in April.

President Donald Trump fired the latest salvo on December 17 in his campaign to pressure Federal Reserve Chairman Jerome Powell to hold interest rates steady.

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