The Fed has said strong economic performance in the U.S. means that the ultra-low rates put in place to spur economic activity after the 2008 financial crisis are no longer necessary. "They're so tight. I think Fed has gone insane", he said.
And Kudlow said the Fed was managing "the transition from ultra, ultra easy money.to something more normal", by raising rates gradually.
Add it all up, and it means the world's most savvy investors are betting that the US economy will keep growing at a healthy clip, without inflation emerging, but that the Fed will have to keep raising rates well above current levels in order to prevent that inflation. "The problem in my opinion is the Fed, " he added.
"The market seems to have accepted the Fed's rate path", said Megan Greene, chief economist at Manulife Asset Management. "I like to stay uninvolved", Trump said.
Stocks have been under pressure since the yield on 10-year US Treasury bonds jumped above three percent last week, a sudden move that raised fears of an overheating economy, speeding inflation and more aggressive Federal Reserve rate hikes.
Powell has repeatedly downplayed the president's comments, saying they have no impact on the Fed's decision-making. The Fed is an independent body and presidents in recent decades have avoided commenting publicly on its actions.
How Sensex lost Rs 4 lakh crore after Donald Trump’s crazy comment
"The Fed has gone insane", he told reporters on Wednesday as he arrived in Pennsylvania for a campaign rally. "He has never interfered with that". The S&P 500, the market benchmark, closed over 2% lower on Thursday, its sixth straight daily decline. The S&P 500 remained near the lowest since July on Thursday morning, while the Nasdaq 100 rallied.
The sell-off came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.
"My assumption for the policy rate is that we can achieve our objective of keeping inflation to the 2 percent symmetric objective and the unemployment rate slowly rising back towards its sustainable rate with that stance of funds rate - but if we need more, we'll do more", he said.
Trump has slapped tariffs on $250 billion in Chinese goods this year, and Beijing has retaliated with levies $110 billion of American products. And I have a lot more to do if I want to do it and I don't want to do, but they have to come to the table.
Powell and Trump haven't personally discussed the matter, the Fed chair has said, but Trump's rhetoric has alarmed some Democrats and Republicans on Capitol Hill.
Higher rates can slow economic growth, erode corporate profits and make investors less willing to pay high prices for stocks.
But, crucially, the higher long-term interest rates don't seem to be driven by expectations that inflation will soar higher.