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Trump escalates his war with the Fed

President Donald Trump has escalated his highly unusual attack on the Federal Reserve.He tweeted early Friday ...

Posted: Jul 20, 2018 8:02 PM
Updated: Jul 20, 2018 8:02 PM

President Donald Trump has escalated his highly unusual attack on the Federal Reserve.

He tweeted early Friday that higher interest rates are taking away America's competitive edge with China. On Thursday, he complained that higher rates were undoing his administration's efforts to help the economy.

The dollar fell on Trump's tweets.

The Federal Reserve was constructed early in the 20th century to be an independent financial institution, free from the whims of politics. The Fed has been carefully and gradually raising rates over the past several years to keep inflation in check and to prevent the economy from overheating.

Higher rates strengthen the dollar against the world's currencies, which makes the United States a more expensive place to invest.

Trump said that raising American interest rates makes China a more attractive to place to invest, because China artificially devalues its currency. When US rates go up, American businesses' dollars go further outside the United States - particularly in China, where the yuan is cheap.

Ironically, the Trump administration's trade war with China has helped devalue the yuan, which has fallen more than 8% over the past three months. China's slowing economy has pushed the yuan lower, too.

The yuan fell sharply against the dollar on Thursday and Friday after China's central bank indicated that it was willing to accept a weaker currency. The People's Bank of China does not let the yuan float freely like the dollar. Instead, China sets a daily trading range for the yuan - an action that Trump and other China critics have described as currency manipulation.

A weak yuan could help China's economy cope with American tariffs, because Chinese products would be cheaper for buyers who pay in dollars.

In an interview with CNBC on Friday, Trump reiterated that he is willing to impose tariffs on all $506 billion worth of goods that China exports to the United States.

The United States is preparing to impose tariffs on another $16 billion of Chinese exports on top of the $34 billion already subject to American import taxes.

Meanwhile, other currencies have lost ground to the dollar this year. The European economy has lagged the United States', and the European Central Bank has only just begun to tighten its monetary policy.

Having it both ways

Trump has spoken out about the dollar and interest rates before. His comments are not only inconsistent with precedent, they are also inconsistent, period.

He has supported a strong dollar in the past.

"The dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar," Trump said in a January 25 interview with CNBC at the World Economic Forum in Davos, Switzerland.

He also previously supported higher interest rates. He criticized former Fed Chair Janet Yellen, saying she should be "ashamed of herself" for keeping interest rates so low.

"The ones who did it right - they saved their money [and] they cut down on their mortgages ... and now they're practically getting zero interest on the money. Those people have really been, you could almost say discriminated against," he said in a September 12, 2016, interview with CNBC.

This is why presidents are not supposed to weigh in on Fed policy. What's politically expedient at the time may not be good for the American economy in the long run.

The Fed had no comment. Chairman Jerome Powell has played down concerns about Trump's politicizing the Fed.

"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."

St. Louis Fed President James Bullard told reporters Friday that Trump's comments would not influence the central bank's decisions.

"Lots of politicians talk about Fed policy. The president does not have to stay out [of the debate]," he said. "It doesn't really change what the committee faces."

- CNNMoney's Donna Borak contributed to this report.

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 751242

Reported Deaths: 13795
CountyCasesDeaths
Marion1032931788
Lake556911009
Allen41692692
St. Joseph36990565
Hamilton36588417
Elkhart29398461
Tippecanoe22901226
Vanderburgh22556400
Porter19356325
Johnson18471389
Hendricks17682317
Clark13226195
Madison13149344
Vigo12614253
LaPorte12419221
Monroe12207176
Delaware10966198
Howard10321225
Kosciusko9630121
Hancock8576146
Bartholomew8169157
Warrick7860156
Floyd7811180
Grant7242179
Wayne7162201
Boone6966103
Morgan6761141
Dubois6218118
Marshall6209116
Cass6016110
Henry5900110
Dearborn589878
Noble581488
Jackson509076
Shelby501496
Lawrence4742122
Gibson444894
Clinton442355
Harrison441875
DeKalb439885
Montgomery438090
Whitley406543
Huntington402681
Steuben400159
Miami395269
Jasper388054
Knox375991
Putnam372960
Wabash361983
Ripley347170
Adams345555
Jefferson335886
White331953
Daviess3033100
Wells295281
Decatur289992
Greene286885
Fayette284864
Posey273835
LaGrange273072
Scott270156
Clay267148
Washington246036
Randolph244783
Jennings235349
Spencer234531
Starke228058
Fountain220948
Sullivan214643
Owen211858
Fulton202942
Jay200932
Carroll193620
Orange188255
Perry187237
Rush175926
Vermillion174844
Franklin170335
Tipton166246
Parke149416
Pike138234
Blackford136232
Pulaski120647
Newton113936
Brown104243
Crawford102516
Benton101714
Martin91715
Warren84015
Switzerland8148
Union72810
Ohio57911
Unassigned0420

Ohio Coronavirus Cases

Data is updated nightly.

Cases: 1108736

Reported Deaths: 20166
CountyCasesDeaths
Franklin1287201467
Cuyahoga1157922211
Hamilton813971250
Montgomery525481043
Summit484271001
Lucas43353820
Butler39013606
Stark33332929
Lorain25672505
Warren24591303
Mahoning22370603
Lake21207388
Clermont20117253
Delaware18852136
Licking16662222
Fairfield16574204
Trumbull16548482
Medina15610271
Greene15281248
Clark14237306
Wood13292200
Portage13251215
Allen11913239
Richland11605211
Miami10849225
Wayne9141223
Columbiana9032230
Muskingum8906135
Pickaway8663122
Tuscarawas8649250
Marion8642138
Erie8056165
Ashtabula7160179
Hancock6998132
Ross6944161
Geauga6838151
Scioto6534106
Belmont6157174
Union584549
Lawrence5731102
Jefferson5678158
Huron5546122
Sandusky5442126
Darke5420129
Seneca5348128
Washington5319109
Athens523960
Auglaize502187
Mercer487385
Shelby476895
Knox4571112
Madison444266
Ashland435797
Putnam4336103
Defiance432399
Fulton432074
Crawford4037110
Brown402461
Logan387677
Preble3855105
Clinton379166
Ottawa373681
Highland359665
Williams348278
Champaign344759
Guernsey324953
Jackson318254
Perry297350
Morrow291840
Fayette285450
Hardin275265
Henry273467
Holmes2701101
Coshocton269060
Van Wert247264
Adams243256
Pike242835
Gallia240650
Wyandot234556
Hocking220563
Carroll197348
Paulding176542
Meigs148440
Monroe136344
Noble136239
Harrison114138
Morgan109624
Vinton85517
Unassigned03
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