TRUMP CALLS FOR BELOW-ZERO INTERESTN RATES IN THE U.S., LABELS FED "BONEHEADS" / BARRON´S MAGAZINE

Trump Calls for Below-Zero Interest Rates in the U.S., Labels Fed ‘Boneheads’

By Nicholas Jasinski


President Donald Trump. Photograph by Win McNamee/Getty Images


No, it wasn’t Tesla CEO Elon Musk berating a sell-side analyst for asking about the electric car maker’s capital requirements on an earnings call. In a series of tweets early Wednesday, President Donald Trump wrote that “boneheads” at the Federal Reserve should lower interest rates to zero or below so that the U.S. could decrease its borrowing costs.

“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt,” Trump wrote. “INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.... The USA should always be paying the the [sic] lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads.’”

The U.S.’s debt load is currently more than $22.5 trillion, according to the U.S. Treasury, while interest expenses reached about $325 billion last year.

The Federal Open Market Committee lowered its benchmark interest rate target in late July for the first time since the financial crisis, to a range of 2.00% to 2.50%. The Fed’s rate-setting panel next meets Sept. 17-18, with futures-market pricing showing an almost-90% probability of another quarter-point cut.

Chairman Jerome Powell and other Fed officials have pointed to slowing economic growth abroad, U.S.-China trade policy uncertainty, and persistently low inflation as reasons for easing monetary policy. Central banks around the world have likewise been lowering interest rates this year.

As expectations of falling interest rates grew and other concerns rocked the market this summer, investors have piled into U.S. Treasuries, pushing down their yields. (A bond’s yield falls as its price rises.) The 10-year yield hit 1.456% on Sept. 4—its lowest level since 2016. 

Globally, there is $17 trillion of negative-yielding debt outstanding, which Barron’s has noted is contributing to the near-record-low U.S. yields.

The S&P 500 was rising 0.3% on Wednesday morning, the Dow Jones Industrial Average was also climbing 0.3%, and the Nasdaq Composite was up 0.6%. The 10-year treasury yield was rising 0.021 percentage point to 1.723%.