Dow Jones Industrial Average (DJIA) futures plunged lower in early trading Thursday. It comes after the Federal Reserve cut the target base rate by 25 points, as expected. But the stock market, not to mention Donald Trump, didn’t get what they wanted: a commitment to deeper, long-term cuts.
As usual, Trump didn’t hide his disgust at the Federal Reserve and chairman Jerome Powell, lashing out on Twitter minutes after the decision.
“Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!”
Dow futures slump 40 points on Thursday
Dow Jones Industrial Average (DJIA) futures slumped 40 points on Thursday after the Fed disappointed traders and ruled out a series of long-term rate cuts.
Donald Trump desperate for deeper cuts
Trump hasn’t been shy about lobbying the Federal Reserve for looser monetary policy. In the last few months, the president has ramped up his aggression towards the central bank, blurring the lines of independence.
Trump has blasted Powell’s “horrendous lack of vision” and called for the Fed to explore zero or even negative interest rates, which he believes would support the stock market. When the European Central Bank carved deeper into negative territory this month, Trump called the Fed “boneheads”:
“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt.”
He has repeatedly called for the central bank to keep pace with Europe, Japan, and China which are pursuing aggressive easing policies.
“As usual, Powell let us down… What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world.”
Dow analysis: the market wanted more
The slump in the Dow Jones futures market reveals that traders wanted a deeper commitment to long-term easing. But Powell poured cold water on those hopes, saying that a “moderate” policy should be enough to maintain the US economy going forward.
While Powell said “a more extensive sequence of cuts” isn’t off the table, the Federal Reserve doesn’t currently expect this course of action.
The summary is likely to anger Trump who has previously called for a 100 basis point cut.
“The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well.”
For now, it seems, Trump isn’t getting what he wants.