When speaking to the press on Friday, President Donald Trump told reports that the Federal Reserve should entirely abandon its balance sheet tightening and usher in a new round of quantitative easing.
In response to a question regarding the Fed's action on interests rates, Trump said, "I personally believe the Fed should drop rates."
"I think they really slowed us down," he continued. "There's no inflation. In terms of quantitative tightening, it should actually now be quantitative easing."
The President, who harshly criticized the U.S. central bank on his 2016 campaign trail for blowing a "big fat, ugly bubble" with its low-interest rate policies and acting politically, went on to say that if the Fed did lower rates from their current level, alongside the launch of a new round of QE, we'd see economic activity of a "rocket ship."
During its March meeting, the Fed decided to hold off on raising the benchmark interest rate while mentioning that there would be no further increases this year.
This is an indication that the Fed could be set to lower its benchmark interest rate, especially considering Fed Chairman Powell's highlighting of a global economic slowdown during the recent meeting.
White House economic advisor Larry Kudlow has also recently called on the Central Bank to "immediately" cut interest rates by 50 basis points.
"I am echoing the president's view ... he's not been bashful about that view ... he would also like the Fed to cease shrinking its balance sheet. And I concur with that view," Kudlow told CNBC last month.
Quantitative Easing is an open market operation taken on by Central banks in which it purchases government securities or other securities from the market in order to decrease interest rates and increases the money supply. The goal is to pump financial institutions with liquidity and encourage lending at lower rates.
The large drawback form such an operation is that the purchasing power of the inflated currency is likely to decrease and the already highly debt leveraged public is likely to go deeper into debt as savings is disincentivized.
