There is now the “threat of deflation” in the US according to economic adviser Stephen Moore, who says that President Trump needs a catalyst in the trade dispute with China and the Fed can cut interest rates to provide it.
“I am calling for the feds to have an emergency meeting next week to announce a decline in interest rates, which will help the economy – it will get it back,” Mr. Moore said Sunday. “It will help the stock market. And they will put pressure on China to make a deal.
“I do not think this can wait until September.”
Mr. Moore, a frequent critic of the Feds policies having obstructed President Trump’s pro-growth agenda, said the Fed should get on board with the administration with the economy has “some challenges ahead – no question about it.”
“Trump has had this story right for the last year, and the Fed has had it completely wrong,” Mr. Moore said. “The Fed has kept raising rates. And they’ve been too slow in lowering them.
“And Trump has been on their tail saying, ‘Come on, get more dollars in the economy,’ which would strengthen the economy. It would strengthen Trump’s hand in these negotiations with China.”
Saying “why wait” as the economic indicators are pointing to this, Mr. Moore warns of deflation of the USD by the Feds’ current monetary policy as investors around the world want pour money into the US economy.
“If you’ve got global investors all over the world who want to buy dollars, and the Fed does not accommodate that by increasing the supply of dollars, then you’re going to get a severe deflation,” Mr Moore concluded. “And that can be as bad for an economy as inflation.”