WASHINGTON – President Trump said that the Federal Reserve has given China a competitive advantage over the US with its monetary policy, adding that it’s clear some officials haven’t listened to his advice to cut interest rates.
Trump has been a critic of the Fed’s interest-rate decisions and has called on the central bank to lower its short-term benchmark rate, currently in a range between 2.25 percent and 2.5 percent. Trump had also called on the Fed to halt the process of shrinking its bond portfolio.
In an interview with CNBC on Monday, Trump said that the Fed had become “very disruptive” and has given the Chinese an upper hand in trade negotiations.
“They devalue their currency, they have for years: It’s put them at a tremendous competitive advantage. And we don’t have that advantage because we have a Fed that doesn’t lower interest rates,” Trump said of China.
“We should be entitled to have a fair playing field, but even without a fair playing field – because our Fed is very, very disruptive to us – even without a fair playing field, we are winning,” he said.
Trump has accused China of reneging on its promises and derailing the latest trade talks. Still, he anticipates meeting with China’s President Xi Jinping later this month on the sidelines of the Group of 20 summit where he hopes to get the discussions back on track. He said Monday that he believes the tariffs he imposed on Chinese goods would ultimately force China into a deal.
While Trump hailed his administration’s efforts to reach a deal, he said that it was despite the decisions by Fed Chairman Jerome Powell, whom he elevated to the post last year, and other Fed officials to raise interest rates.
“It’s more than just Jay Powell – we have people on the Fed that really weren’t – they’re not my people,” he said. “They certainly didn’t listen to me because they made a big mistake. They raised interest rates far too fast.”
Trump said that the Fed’s decision two years ago to slowly shrink its $3.8 trillion asset portfolio, which some refer to as “quantitative tightening,” has also led to tighter monetary policy relative to China.
Beginning last fall, the Fed began allowing its bond holdings to decline by up to $50 billion a month, including $30 billion in Treasurys and $20 billion in mortgage bonds, though the actual redemptions have been less than that on average. Beginning in May, it reduced the monthly pace of the runoff of Treasury holdings to $15 billion, and it will stop reducing its Treasury holdings by October.
“Now, China’s doing just the opposite,” he added. “They’re pumping money in. So I’m winning, but I’m not winning on a level table.”