Economists weigh in on Trump's demand that the Fed slash its benchmark rate to zero: “Trump is confused.'
President Donald Trump’s demand on Wednesday that the Federal Reserve slash its benchmark interest rate “to zero or even negative” is misguided, economists say, because rates that low would be a sign of weak economic conditions.
Carl Weinberg, chief economist at High Frequency Economics, noted that when a 10-year government note has negative interest rates, it is worth less than “a bag of dirt stored in your basement.” — Donald J. Trump September 11, 2019 Jeremy Siegel, finance professor at the Wharton School at the University of Pennsylvania, said he thinks the Fed’s benchmark federal funds rate should be lowered, but not to zero or even negative.
Diane Swonk, chief economist at Grant Thornton, agreed, saying on Twitter that a steep drop in the Fed’s benchmark rate would be a signal to the market that the economy was much weaker than it appears.Market participants would likely view such a drop in rates as a signal that the economy is much weaker than it appears, which runs the risk of triggering a panic and self-fulfilling recession.
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