Trump says market drop is 'correction that we've been waiting for'

Trump says market drop is 'correction that we've been waiting for'

Central bank rate hikes were a "necessary development", International Monetary Fund chief Christine Lagarde said Thursday, a day after Donald Trump sent global markets tumbling by calling Fed increases "crazy".

"Actually it's a correction that we have been waiting for, for a long time", he continued.

"The Fed has gone insane", he told reporters on Wednesday as he arrived in Pennsylvania for a campaign rally. "I think our nominees have been absolutely first rate".

"I'm paying interest at a high rate because of our Fed, " he said.

But higher U.S. interest rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt.

And while he acknowledged higher rates helped savers, he criticized the Federal Reserve's tactics as "too aggressive". "It is doing well", Trump said. Fed officials including Powell, Trump's handpicked chair, have said pointedly that they will not be influenced by comments from elected officials, and will make decisions based on economic data.

The market is reacting to a "triple whammy" of rising interest rates, higher oil prices and a stronger dollar, according to Yardeni Research.

"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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Both Powell and the president confirmed in recent days that they have not spoken to each other about interest rates. Economists generally agree that in order to prevent runaway inflation, the Federal Reserve can raise interest rates to restrain the money supply.

One former Treasury official said while Trump's comments are unusual, they don't appear to be changing the Fed's direction.

In a brief interaction with reporters and later in comments to Fox News, Trump said the USA central bank was "too aggressive" in raising interest rates.

Mr Trump also told Fox News the Chinese had lived too well for too long.

By historic standards, interest rates remain low.

During an event earlier Wednesday amid the sell-off, Trump and his top economic adviser, Larry Kudlow, said they believed the American economy was robust.

Fed Chairman Jerome Powell is aiming to extend the second-longest USA economic expansion on record by moving interest rates up just quickly enough to prevent overheating, but not so rapidly that the central bank chokes off growth.

Meanwhile, Europe's main stock markets slid by around 1.5% at the start of trading today following heavier falls across Asia and on Wall Street overnight.

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