Trump raises pressure on Fed, seeking rates of zero or less
President Donald Trump urged the Federal Reserve to lower interest rates to a level typically reserved for recessions or periods of persistently weak growth, suggesting that such a setting could allow the government to refinance Treasury debt at a lower cost.
The Fed should “get our interest rates down to ZERO, or less,” Trump said in an early Wednesday tweet that went beyond his previous attacks and demand for a cut of one percentage point. “We should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term.”
The idea is flawed. While it’s true that the government could sell bonds at lower interest rates than those on much of its outstanding debt, it would have to pay a big premium to buy back and retire some old bonds, effectively negating the financial benefits. Certain treasuries, for instance, fetch prices of as high as $1.40 for every $1 of face value.
Monetary authorities such as the European Central Bank, the Swiss National Bank and the Bank of Japan have had policies on interest rates that are effectively below zero, as a way to boost demand for loans and stimulate sluggish economies. The Fed’s benchmark rate is currently 2%-2.25% following a quarter-point reduction on July 31 -- the first cut since the Fed lowered rates effectively to zero in 2008, during the worst financial crisis and economic downturn since the Great Depression.
https://www.msn.com/en-us/money/markets/trump-raises-pressure-on-fed-seeking-rates-of-zero-or-less/ar-AAH8zvx?li=BBnbfcN
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