Federal Reserve ‘out of control’, says Donald Trump

US stocks have plunged to their worst loss in eight months

RICHARD DREW APUS stocks have plunged to their worst loss in eight months

Trump and his advisers dismiss the warnings, insisting the economy remains robust and the president can deliver growth of 3 percent or better for years to come. So even in Italy, which is in the midst of a budget crisis, the 10-year bond yield is just above 3.5 per cent - not much of a risk premium over Treasuries there. If the economy maintains its current pace through the fourth quarter, the resulting 3.8 percent growth would be remarkable at this stage in an expansion but the economy is not overheating or in any danger of doing so.

But beyond those headline numbers, the details of how the prices of different types of securities have moved relative to one another tell a story that is decidedly optimistic. "The problem I have is with the Fed". Higher interest rates could increase his debt payments considerably. And foreign countries will likely buy fewer USA exports as demand slows and tariffs kick in. Additionally, companies from multiple sectors, including Ford and Procter & Gamble, warn that tariffs, higher trucking prices, rising wages and other factors are driving their costs up and eating into profits.

The benchmark Nikkei 225 dropped almost two percent at the open and extended losses to below the three-percent mark, as traders fretted about surging interest rates and an ongoing trade spat.

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Last week's jump in yields followed strong United States data but many analysts have been anticipating dynamics in the bond market to change due to expectations that central banks in Europe and Japan will soon phase out bond-buying programmes. "It's reflecting the possibility that this recovery has further legs".

Put another way, very low real interest rates favor borrowers over savers.

The yields of inflation-protected bonds have moved mostly in lock step with traditional bonds in recent weeks, suggesting that traders haven't become more anxious about inflation. American families continue to spend at a healthy rate, and consumer confidence is near 20-year highs. He has shirked any criticism of the ballooning deficit, tried to jawbone foreign leaders to lower oil prices, and repeatedly attacked the central bank for raising interest rates. There is no indication that the current or projected interest rates are affecting USA economic growth. Kaplan is a voting member this year of the Fed's rate-setting committee. But until this summer, he had lodged no criticism of the Fed's rate hikes.

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Rates a big part of selloff. "So I see this as just a natural correction after the markets were up a lot". Trump owes more than $300 million to Deutsche Bank AG of debt with interest rates that rise or fall depending on Fed policy.

The president's remarks were quickly qualified by National Economic Council Director Larry Kudlow, who said the Fed was "on target" in policies that were responding to a strong economy.

While the attention of investors was riveted by the sharp selloff in stocks earlier this week, another key turn in financial markets is worth paying attention to: The spike in bond yields. Some 30-year fixed-rate mortgages are now offered with an interest rate above 5 per cent, significantly higher than when Trump took office.

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"Our course is clear: Resolutely conduct policy consistent with the FOMC's symmetric 2 percent inflation objective, and stand ready to act with authority if expectations drift materially up or down", Powell said last week, referring to the policy-making Federal Open Market Committee.

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