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President Donald Trump on Wednesday continued his verbal assault on the Federal Reserve, who he blames for slowing the economy, tweeting that the central bank should cut interest rates to zero or even set negative interest rates. The president also called Fed officials “boneheads” in the tweet.
“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term,” he said.
The president also made a new suggestion not seen in some of his past attacks on the Fed, saying that the country should refinance its debt load.
Trump had made a similar suggestion during the 2016 presidential campaign. The idea then was widely dismissed as a move the actually could drive Treasury yields higher, jeopardize the nation’s standing among its creditors and pose a threat to the U.S. dollar as the world’s reserve currency.
During a CNBC interview in May 2016, Trump said that if the economy turned south, he would try to get creditors to accept partial payment on U.S. debt.
“I would borrow, knowing that if the economy crashed, you could make a deal,” he said then.
His idea was that the U.S. would pay less than face value on the Treasury debt it issues to cover the burgeoning budget deficit. However, doing so would only increase the costs of issuing the debt as creditors would demand higher interest payments.
Trump has long bemoaned Fed policy, saying the central bank should get more in line with the near-zero rates employed by the nation’s global competitors. The Fed currently targets its benchmark overnight lending rate in a range between 2% and 2.25%, the highest of any G-7 nation.
In previous tweets, he has repeatedly ripped his own appointee, Fed Chairman Jerome Powell, as being out of step with the economic needs in the U.S.
“The USA should always be paying the the lowest rate. No Inflation! It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of “Boneheads,” Trump said in Wednesday’s tweets.