Trump 'not thrilled' about Fed rate hikes, threatens China again

President Donald Trump took the unusual step of explicitly criticised the Federal Reserve for raising interest rates and the potential impact on the US economy, as well threatening to hit China with a new wave of tariffs.

Trump said he was "not happy" with the Fed’s decision to raise interest rates, which have been raised twice in 2018, with two more hikes expected in the year.

"Because we go up and every time you go up they want to raise rates again," he said in an interview with CNBC's Squawk Box. "I am not happy about it. But at the same time I’m letting them do what they feel is best.”

Trump argued that higher rates will put the US at a disadvantage and impede a faster growth, he is also worried that the administration’s work will be nullified by the hikes.

The comments have raised eyebrows since historically, presidents rarely intercede when it comes to the Fed’s decisions which are politically independent regardless if they are unpopular or not.

“Now I’m just saying the same thing that I would have said as a private citizen,” he said acknowledging the rare situation. “So somebody would say, ‘Oh, maybe you shouldn’t say that as president.' I couldn’t care less what they say, because my views haven’t changed.”

His statement also caused markets to react with stocks, the dollar and treasury yields all falling.

The dollar plummeted 0.5%, from its 12-month high, in a matter of minutes following remarks, but then clawed some of those losses back.

CNBC on Friday morning released the full interview with Trumpm, where he said he was "ready to go to 500”, meaning he was prepared to slap tariffs on all Chinese imports into America, worth around $500bn per year.

The President said, "I’m not doing this for politics, I’m doing this to do the right thing for our country..... We have been ripped off by China for a long time.”

Dow Jones futures were sent into the red, suggesting the DJI index will fall 0.1% to 24,946.

Analyst Neil Wilson at Markets.com. said the comments about the central bank "may well worry Fed watchers and policymakers given the implicit meddling in their affairs".

"It may be that someone has just explained yield curve inversion and recession risk to him, but really you cannot help feel this is less about criticising the Federal Reserve for monetary policy decisions and more about attempting to cool the dollar’s ascent. In Jay Powell, his pick is in the Fed chair and the pace of tightening has been no quicker than markets have been broadly anticipating this year."

Wilson said a clear pattern had emerged that President Trump wants a weaker dollar, having said the dollar was "too strong" prior to his inauguration, with Treasury secretary Mnuchin earlier this year echoing those comments.

The China threats were proof, if it were needed, Wilson said, "that the president is prepared to go all the way in the trade war to exact concessions from China, which simply cannot match the US firepower. In light of the EU and others saying they are ready to respond to tariffs on cars, the stakes are rising fast. Whether we get to the point where there is a full blown trade war remains debatable, but the odds are shortening by the day."

Jasper Lawler, market analyst at London Capital Group said: “The reality is that Fed Chair Powell is very unlikely to adjust his decision making just because Trump wants a weaker dollar. At the margins, there is a tiny chance that some policy makers are less inclined to hike on the back of Trump’s comments, but this risk is extremely small.”