President Donald Trump on Friday kicked the Federal Reserve when it was down by highlighting a communication snafu from New York Fed President John Williams late Thursday afternoon.
In his remarks and subsequent walk-back, Williams seemed initially to support aggressive easing, only to have a spokesman try to downplay his comments.
In his speech, Williams argued that his research on the “zero lower bound” showed the Fed should act to cut interest rates at the first sign of illness and not wait for a disease to spread with benchmark interest rates are low.
Investors took the comments as evidence the New York Fed President supported a half-point rate cut at the Fed’s next meeting on July 30-31. Fed funds futures quickly priced in greater than 50% chance of a 50 bp move.
After the sharp reaction, the New York Fed put out a statement trying to walk back the comments.
A New York Fed spokesman said Williams’s comments were “academic” and not about the current policy.
Trump tweeted Friday that he liked Williams’s initial stance and not the reversal.
Trump has been urging the Fed to cut interest rates all year. He has often bemoaned the fact that Chinese leaders have complete control over their central bank.
Ethan Harris, head of global economics research at Bank of America, called Williams’s remarks “very bad communication.”
In an interview on Bloomberg Television, Harris said Williams’s comments were not about a quarter-point or half-point move, but markets hear what they want and it is up to Williams to explain to the public what he was talking about, he added.