Donald Trump attacks ‘loco’ US Federal Reserve after worst stock market sell-off in months

Mr Trump appeared to blame the Fed for a stock rout that market analysts mostly attributed to fresh concern about his trade war with China

US markets dropped on Wednesday, after the IMF cut growth forecasts (AFP/Getty Images)

Donald Trump hit out at the Federal Reserve on Wednesday, accusing them of “going loco” over interest rate hikes this year, hours after the worst US stock market sell-off since February.

Mr Trump said in an interview on Fox News that the market plunge was not because of his trade conflict with China, instead blaming the US central bank. “That wasn’t it. The problem I have is with the Fed,” he said. “The Fed is going wild. They’re raising interest rates and it’s ridiculous. The Fed is going loco.”

He added: “They’re so tight. I think the Fed has gone crazy.”

Mr Trump appeared to blame the Fed for a stock rout that market analysts mostly attributed to fresh concern about his trade war with China.

The broad US stock market sell-off on Wednesday took the S&P 500 to the lowest in three months, the Dow Jones Industrial Average plunged as much as 836 points and the Nasdaq 100 Index tumbled more than 4 per cent for its worst day in seven years.

The sell-off came a day after the IMF said the world economy was plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.

Mr Trump has slapped tariffs on $250bn (£190bn) in Chinese goods this year, and Beijing has retaliated with levies of $110bn of American products. The IMF projections don’t take into account the president’s threat to expand the tariffs to effectively all of the more than $500bn in goods the US bought from China last year.

Mr Trump has been publicly criticising the Fed - led by Chairman Jerome Powell, whom he appointed - since July for interest-rate increases and declared he was “not happy” in September after the third rate hike of the year.

Among those who came to Mr Powell’s defense was IMF chief Christine Lagarde.

“I would not associate Jay Powell with craziness,” she told CNBC. “No, no, he comes across, and members of his board, as extremely serious, solid and certainly keen to base their decisions on actual information, and decide to communicate that properly.”

The market rout continued across Asia, with benchmarks from Tokyo to Hong Kong seeing declines in excess of 3 per cent. Mr Trump, who has frequently invoked rising stock prices as an affirmation of his economic policies, played down the significance of the market drop even as he pointed the finger at the Fed.

“I think it’s good,” Mr Trump said of the US stock decline. “Actually, it’s a correction that we’ve been waiting for for a long time. But I really disagree with what the Fed is doing."

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 per cent in September, is at a level that many officials expect will cause wage and price gains to accelerate over time.

Bloomberg