International Monetary Fund chief defends Powell after Trump says Fed has 'gone crazy'

Stock markets

As well as criticising the Fed, Mr Trump said his trade policies had hurt China's economy. "The fact that there's somewhat of a correction given how much the market has gone up is not particularly surprising".

By historic standards, interest rates remain low.

"The Fed continues to flood the market with U.S. dollars", he said in one tweet.

Those financial crisis-inspired programmes - such as quantitative easing - are now ending and the Fed has raised U.S. interest rates three times already this year - raising borrowing costs - and could add a fourth hike by the end of 2018.

"The fundamentals and future of the US economy remain incredibly strong", Sanders said in a statement. "It's the combination of the two that's probably showing in some of the tensions" in markets.

Lagarde said she would meet Pakistani officials on Thursday, with expectations that Islamabad will request a bailout of its shaky economy.

It's often said that stock markets, whether good or bad, are unfairly linked to whoever sits in the Oval Office.

Trump had blamed "crazy" Fed policies for contributing to current financial market turmoil as a global sell-off continued amid stronger signs of rising financial volatility which the International Monetary Fund and the World Bank were scheduled to address during their annual meetings. "I think it's far too fast, far too rigid".

Powell and Trump haven't personally discussed the matter, the Fed chair has said, but Trump's rhetoric has alarmed some Democrats and Republicans on Capitol Hill.

A trade war, blamed mostly on the inward-looking economic policy of Donald Trump, has also had its share in dampening investors' confidence.

Fed named Mr Powell to lead the central bank but can only fire him for cause. As the economy heats up, pushing prices higher the central bank raises rates to prevent inflation from gaining hold.

Concerns about higher rates have roiled the U.S. Treasury market, where yields have risen to multi-year highs. Facebook, which ranks sixth, has tumbled 30 percent since late July, and Netflix has fallen 22 percent, meeting the threshold for a "bear market".

Analysts attribute some of the recent share price declines to sales by investors anxious that trade tensions will hurt growth, while trade tariffs and rising interest rates raise costs for businesses.

Investors should expect more episodes of volatility such as the recent surge in yield on the 10-year Treasury, Tobias Adrian, head of the IMF's monetary and capital-markets department, said in an interview in Bali. Even at the projected 3.25 percent in the Funds at the end of 2019, the potential reduction is well below the peaks of 550 and 525 basis points at the beginning of the last two rate reduction cycles.

But as the economy began to post solid and consistent growth following the global financial crisis of 2008, and prices began to creep higher, the central bank was anxious to return to a more normal policy. "It's never been done".

In effect, the multi-trillion dollar global bond market is signaling a little greater confidence than it did just a few weeks ago that the nine-year expansion in the United States may have room to keep going for years to come, and without inflation taking off. "The problem is that in the postwar period in the USA, that has never been achieved".

A neutral rate enables economic growth without the risk of significant inflation.



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