Trump calls "loco" Federal Reserve "too aggressive" - Fox interview

US stocks have plunged to their worst loss in eight months

"I think the Fed has gone insane", Trump said. "They're so tight. I think the Fed has gone insane", Trump said in Pennsylvania before a political rally. "I think the Fed is far too stringent, and they're making a mistake, and it's not right".

But he's also calling the drop "a correction we've been waiting for for a long time".

The president made the comments after a massive sell-off on Wall Street on Wednesday, where more than 800 points were shaved off the Dow Jones Industrial Average.

So, with higher interest rates and the higher cost of fuel at this point in time, the Fed had created a situation where the market can go into hibernation and just stay where it is for the next few years. As big USA companies give updates in the coming weeks on how much they earned during the summer, investors will listen as CEOs say how much of an impact they're seeing from higher rates.

This week's dizzying sell-offs in the financial markets have been a rude reminder the US economy is no longer relying on ultra-low interest rates to fuel growth.

President Donald Trump has zeroed down on the Federal Reserve's interest rate increases as the main reason for yesterday's nosedive in stock prices.

"The US tech bubble may take a while to burst and we are facing many external uncertainties - trade wars, risks in emerging markets currencies and oil price". He has repeatedly criticized the central bank for raising interest rates this year, decisions aimed at preventing the economy from overheating.

Trump's public criticism of the Federal Reserve, whose chairman, Jerome Powell, Trump appointed, is a sharp departure from his recent predecessors.

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Mr Trump has plenty of form when it comes to Fed bashing.

"In the absence of a specific trigger, investors are now voting with their feet due to mounting concerns around trade tensions and the impact on global growth, higher interest rates in the USA, and a potential rotation away from equities due to rising bond yields", said Richard Hunter, head of markets at Interactive Investor.

And Kudlow said the Fed was managing "the transition from ultra, ultra easy money.to something more normal", by raising rates gradually. "So the Fed is taking its independent course", he said.

Trump is objecting to the Federal Reserve's modest but steady increases in the interest rate, which it raised to 2.25 percent in late September. Meanwhile, yields in Europe remain suppressed: the European Central Bank is planning to stop its bond-buying program by the end of this year, but it's not going to start unwinding its $3.8-trillion bond holdings anytime soon. The 10-year rate was below 1.4 percent as recently as July 2016. "It is doing well", Trump said. "But I think the Fed has gone insane", he said.

Add it all up, and it means the world's most savvy investors are betting that the USA 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 president is concerned about the Fed raising interest rates too much and slowing down the economy".

The Federal Reserve has already increased rates three times in 2018, and eight times since the global financial crisis.

This helps explain this week's largely expected downgrade by the International Monetary Fund of the global economic outlook, highlighting particular concerns around emerging markets.

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