Markets fall after Trump criticises Fed rate hikes

Trump MAGA hat

Jae C. Hong AP Images

"I'm ready to go to 500", Trump said the CNBC interview broadcast Friday.

S&P 500 futures fell by 0.3% in response to the comments and Dow Jones Industrial Average futures fell 0.4% shortly after the news.

Earlier this month, the U.S. imposed 25% tariffs on $34bn of Chinese imports. "And China, their currency is dropping like a rock and our currency is going up and I have to tell you, it puts us at a disadvantage". The administration has also released a list of 10 per cent tariffs on an additional US$200 billion of Chinese goods, which could take effect as early as next month.

Even while threatening China, Trump tried to reassure the Chinese government that he was not looking to "scare" the country.

Trump's comments that China and the European Union are manipulating currencies contradict a Treasury Department semi-annual report released in April that refrained from naming any country a currency manipulator based on specific criteria. Volkswagen shares are down 2% at 12.35 a.m. BST (7.35 a.m. ET) and BMW is down 1.5% at the same time.

Around $505 billion of Chinese goods came into the United States in 2017, leading to a trade deficit of almost $376 billion, U.S. government data shows.

The president's comments likely put a ceiling on the recent US dollar rally so far this year, said Viraj Patel, a foreign-exchange strategist at ING Bank NV.

"We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns", he said in a radio interview last week with "Marketplace".

"I am not happy about it", Trump said.

In a series of tweets on Friday, Donald Trump complained about the Fed's current round of rate hikes, saying while policymakers in Europe and China are cutting their interest rates, America's central bank is doing the opposite, which is widening the trade imbalance he is trying to remedy.

The Fed has hiked interest rates five times since Mr. Trump took office, with the last two increases coming under Chairman Jerome Powell, whom the president picked to replace Janet Yellen. "But at the same time I'm letting them do what they feel is best", Trump said.

Trump's remarks immediately raised questions about Trump's commitment to the Fed's political independence, a key pillar of the central bank's function.

Trump's comments come in the wake of a growing rift between the two biggest economies.

Later, the White House said in a statement that Trump respects the Fed's independence and was not interfering with its policy decisions. "So somebody would say, 'Oh, maybe you shouldn't say that as president". In June, the nation's central bank raised rates for the seventh time since December 2015, in a move created to slowly cool the economy.

"Following falls in USA shares and ahead of the weekend, sales for position-adjustment reasons are seen overwhelming the market", SBI Securities said in a commentary.

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