Trump slams the Federal Reserve for raising interest rates

Trump argued the Fed's rate hikes went against "all of the work that goes into doing what we're doing".

The stock market, which usually favors cheap money and reacts negatively to rate hikes, fell, as did Treasury yields and the dollar in response to the president's comments, according to CNBC. Given Trump's recent Fed picks, this doesn't appear to be the case. But at the same time I'm letting them do what they feel is best, ' Trump said.

'Of course the President respects the independence of the Fed.

His remarks to CNBC weren't the first time that Trump has departed from a long-standing practice of US presidents steering clear of commenting on Fed policy and the value of the dollar. Powell told lawmakers that "for now - the best way forward is to keep gradually raising the federal funds rate". The POTUS told CNBC's Joe Kernen, in an interview that will air Friday on Squawk Box, "I'm not thrilled" with the two interest rate increases the Fed has instituted this year and the two more that are likely to come before 2018 is up.

Marc Goldfried, chief investment officer and head of fixed income at Canoe Financial, reacts to the latest commentary from the U.S. Federal Reserve Chair Jerome Powell.

Presidents have historically avoided criticizing the Fed, which is created to be independent from political interference.

Fed spokeswoman Michelle Smith declined to comment, Bloomberg reported.

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Feroli also noted that the easiest way for Trump to bend the Fed to his political will would be to fill the Federal Reserve Board of Governors with members that agreed with a low interest rate policy or were personally connected to the president. Higher interest rates mean higher borrowing costs for consumers and higher mortgage rates.

The reaction to Trump's remarks in the financial markets was muted.

The White House also attempted to assuage fears of the president pressuring the Fed immediately after Trump's comments were released.

Indeed, overall financial conditions in the US are largely unchanged since Trump took office in January 2017 despite the Fed's gradual tightening campaign, and looser than they were on average in 2016, according to a Goldman Sachs index.

"The Fed's independence from short-term political pressures is critical to enabling it to take the longer-run perspective that is essential for achieving its legislated dual mandate for jobs and price stability", said Donald Kohn, a former Fed vice chairman who is now a senior fellow at the Brookings Institution in Washington. Rubin argued for that policy to be maintained in a New York Times op-ed piece a year ago when the White House was mulling the choice of Yellen's successor.

When Robert Rubin led President Bill Clinton's National Economic Council, he adopted a rule of never commenting on the Fed's actions - a policy that was subsequently followed by the George W. Bush and Obama administrations. But JPMorgan economist Michael Feroli advanced an interesting alternate theory: Trump's comments may inspire the Fed to go the other direction.

The same couldn't be said for Arthur Burns under Richard Nixon.

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