White House says economy 'incredibly strong' after stock-market dive

Mae Love
October 11, 2018

President Donald Trump has renewed criticism of the U.S. central bank, blaming "crazy" interest rate rises for prompting steep stock market falls. "The Fed increasing rates to me was a sign that the economy was able to stand on its own two feet". "They're so tight. I think Fed has gone insane", president Trump replied.

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

Mr Trump said: "I like to see low interest rates". The Dow Jones Industrial average fell 3.15 percent; the tech-heavy Nasdaq index dropped 4.08 percent. Powell said last week he expects to stick with the current path of gradual interest-rate hikes while monitoring risks in the economy.

White House Press Secretary Sarah Huckabee Sanders said in a statement following the close of markets that the US economy is "incredibly strong" despite the sell-off.

On Wednesday, the Dow fell 831 points, or 3.1 percent, to 25,598.

"The selling is not panicking but it's persistent", Briefing.com analyst Patrick O'Hare said of the proceedings. "It's all about investors rethinking their exposure to stocks".

Stocks have sold off in recent days on worries about higher borrowing costs.

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The Fed has been raising interest rates gradually since December 2015, and last month lifted its target for short-term rates to a range of 2 per cent to 2.25 per cent, responding to an economy that has been growing at a pace well above what Fed officials believe is sustainable.

"The fundamentals and future of the USA economy remain incredibly strong", Sanders said in a statement.

"It's shifting the tectonic plates", said Jack Ablin, chief investment officer at Cresset Wealth Advisors.

And while stocks could get a boost from strong corporate earnings, there are concerns the United States trade conflicts will start to undermine profits.

The sell-off came a day after the International Monetary Fund said the world economy is plateauing and cut its growth forecast for the first time in more than two years, blaming escalating trade tensions and stresses in emerging markets.

Markets have been shaken by a row between Brussels and Rome, which are at loggerheads after Italy's populist government passed a purse-busting budget last week to the annoyance of the EU. The Dow lost more than 550 points in afternoon trading.

In other markets, oil prices fell sharply on worries that Hurricane Michael will dent demand for gasoline and other petroleum products.

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