President Trump said he won't fire Federal Reserve Chairman Jerome Powell but blamed an "out of control" U.S. central bank for the worst stock market sell-off since February.
Trump also told reporters in the Oval Office Thursday morning that he knows monetary policy better than the Fed's leaders and continued criticizing them for interest rate increases.
"The Fed is out of control," Trump said. "I think what they're doing is wrong."
The president added that the Fed's interest rate increases are "not necessary in my opinion and I think I know about it better than they do."
Trump's criticisms mark a stunning departure from the practices of his recent predecessors. Presidents for more than two decades had avoided public comments on the Fed's interest rate policies as a way of demonstrating respect for the institution's independence.
The president has repeatedly criticized the Fed over the past 24 hours as markets plunged, saying Wednesday that the central bank was "going loco." Market analysts, meanwhile, mostly attributed the decline to concerns that Trump's trade war with China could escalate. Trump instead has placed blame squarely with the Fed.
"I'm not going to fire him," Trump said Thursday of Powell, a Trump appointee who legally can only be fired for cause. "I'm just disappointed at the clip. I think it's far too fast, far too rigid."
Trump said the market plunge is "a correction that I think is caused by the Federal Reserve."
The president has been publicly criticizing the central bank since July for interest rate increases and declared he was "not happy" in September after the third rate hike of the year.
Most economists consider a reputation for independence essential for maintaining a central bank's credibility with investors that it will guard against inflation.
Though the laws governing the Fed are intended to insulate it from day-to-day politics, the strength of those barriers isn't clear. The Federal Reserve Act says governors may be "removed for cause by the President." But the law doesn't specify what "cause" means.
White House economic adviser Larry Kudlow sought to downplay Trump's comments about the Fed.
"He has never attacked the Fed's plan or strategy," Kudlow told reporters on the White House lawn Thursday, speaking before Trump's Oval Office comments. "He has never interfered with that. He is giving his opinion, and it's an informed opinion."
The S&P 500 fell the most since February and the Nasdaq 100 had its worst day in seven years on Wednesday, paring gains for the year and promising little respite for equity investors Thursday. The S&P 500 remained near the lowest since July on Thursday, while the Nasdaq 100 rallied.
The sell-off came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.
Trump has slapped tariffs on $250 billion in Chinese goods this year, and Beijing has retaliated with levies of $110 billion of American products. The IMF projections don't take into account Trump's threat to expand the tariffs to effectively all of the more than $500 billion in goods the U.S. bought from China last year.
Powell's goal is to extend the second-longest U.S. economic expansion on record by moving interest rates up just quickly enough to prevent overheating, but not so rapidly that the central bank chokes off growth. Powell said last week he expects to stick with the current path of gradual interest rate hikes while monitoring risks in the economy.
Trump said Tuesday that the economy is enjoying "record-setting" numbers and "I don't want to slow it down even a little bit, especially when we don't have the problem of inflation."
One reason why the Fed has been raising interest rates even with little sign of an inflation breakout is because the unemployment rate, which fell to 3.7 percent in September, is at a level that many officials expect will cause wage and price gains to accelerate over time.
Trump on Thursday also indicated that the Fed's policies were harming him personally. Trump owes more than $300 million to Deutsche Bank AG of debt with interest rates that rise or fall depending on Fed policy. Higher interest rates could increase his debt payments considerably.
"I'm paying interest at a high rate because of our Fed," he said.
