The Fed, described this week by Donald Trump as "loco" seems largely responsible for the strength of the U.S. dollar and the underperformance of USA treasuries.
Trump has levied or threatened tariffs on goods from economies around the world, notably China, but also on traditional allies such as the European Union. The central bank meets two more times this year and is expected to hike rates one more time.
"The economy is red-hot and threatens to fry". The Fed has "gone insane", he said. He also expects the Fed to overshoot its 2% inflation target by "a bit" but added, "I don't see any signs of greater inflationary pressures on the horizon".
"Everyone knows the Fed isn't acting insane". He also said, "No, I'm not going to fire him (Powell)".
Worries about higher borrowing costs have sparked the U.S. stock sales in recent days, while a spike in U.S. Treasury yields and solid U.S. economic data have raised concerns that the Fed may pick up the pace of its interest rate hikes. "The problem in my opinion is the fed", he added. "It needs dry powder for the next crisis", said Hooper.
"If anyone picked up an economic textbook, they would have known this was coming.
And we have interest rates going up at a clip that's much faster than certainly a lot of people, including myself, would have anticipated", the US President said.
For bond funds, higher rates should mean more income in the long run, even though they're knocking down prices at the moment. Suddenly, stocks are getting competition from boring bonds.
Global stocks tumble after Trump's 'crazy' Federal Reserve comment
"The current dip in confidence can be allayed were the Federal Reserve to signal it is easing off its quantitative tightening and rates rises", said Jasper Lawler, the head of research and education at London Capital Group, in a note on Thursday.
The picture has been further clouded by Trump's trade crackdown.
"If you're going be anxious about a White House that was going to try to politicize the Fed, then you can think of other people that they might put there besides the people that we choose", Kevin Hassett, chairman of the White House's Council of Economic Advisers, said at the Council on Foreign Relations on October 9.
Is a recession coming soon?If rates rise slowly, that higher income could offset the price drops and leave investors with positive returns. As Fed policy normalizes, "it will no longer be clear whether interest rates need to go up or down, and explicit forward guidance about the future path of policy will no longer be appropriate", he said. At market close on Wednesday, the Dow (^DJI) lost 3.15%, or 831.83 points, and the S&P 500 (^GSPC) fell 3.29%, or 94.66 points.
"We are in an economic boom most folks thought was impossible", Larry Kudlow, Trump's top economic adviser, told CNBC on Thursday.
Wednesday's sell-off follows a report this week by the International Monetary Fund that said global growth was plateauing.
Translation for those not aligned with the Wall Street - Washington - Silicon Valley Axis: The Fed wants to stifle your wage growth and job mobility by establishing a so-called neutral level that neither spurs nor slows economic growth.
Zandi doesn't think so.