Fed ‘has gone crazy’ as it raises interest rates

Irving Hamilton
October 11, 2018

Wall Street stocks plummeted Wednesday amid worries about surging USA interest rates and the impact of trade disputes, as President Donald Trump blamed the Federal Reserve, saying it had "gone insane".

Trump's use of the word correction to describe the sell-off could be significant.

But he's also calling the drop "a correction we've been waiting for for a long time".

As for whether Wednesday's overall market drop could signal an end to broader economic growth, Benedict says there won't necessarily be long-term affects if the markets can stabilize before the losses grow more severe. It has fallen almost 5 percent from its all-time closing high on September 20.

The Nasdaq has fallen 8.5 percent from its record closing high on August 29. Netflix was down more than 8 percent, Amazon was off 6 percent and Apple and Google were both down more than 4.5 percent. A spike in Treasury yields and solid US economic data have sparked concerns that the Federal Reserve may pick up the pace of its interest rate hikes. "They're so tight. I think Fed has gone insane", president Trump replied.

Steve Massocca, senior vice president at Wedbush Securities in San Francisco, said he thought the downturn would be short-lived.

Gina Martin Adams, the chief equity strategist for Bloomberg Intelligence, said investors are concerned about the big increase in yields, which makes it more expensive to borrow money.

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"It's probably the beginning of the correction", said Oliver Pursche, vice chairman and chief market strategist at Bruderman Asset Management in NY.

President Trump, who has claimed much of the credit for the strong economy, has criticized the Fed's pace of raising interest rates, saying going too fast could slow growth and job creation.

He has frequently criticised the U.S. central bank for gradually raising interest rates, and on Wednesday reiterated his position: "I really disagree with what the Fed is doing".

"I think the Fed has gone insane".

It was at least the third time that the president has criticised Fed policy since taking office.

In fact it is his policies that are behind the changes: tax cuts and spending policies are expected to juice the economy, adding to the Fed's justification to raise interest rates, while trade conflicts raise costs for companies, which could hit the bottom line in quarterly earnings - something analysts said helped prompt Wednesday's sell-off.

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