Kudlow Faults Negative Interest Rates, Contradicting Trump

(Bloomberg) White House Economic Adviser Larry Kudlow criticized Europe’s low and negative interest rates, contradicting his boss, President Donald Trump, who earlier in the week tweeted that the U.S. Federal Reserve should pursue a similar approach by bringing down rates “to ZERO, or less.”

Kudlow told reporters in Baltimore on Friday that “The Europe story -- all this super easy money, zero and negative rates. You know, if it was going to work it would have worked. And it’s not worked.”

His remarks followed the European Central Bank’s announcement this week that it would restart large-scale asset purchases aimed at reviving growth and inflation in countries that share the euro.

But his comments Friday veered in a different direction from those of Trump, who wants the U.S. central bank to lower rates and resume its own asset purchases.

“Easy money, you can print as much money as you want,” Kudlow said. “It never works and it won’t work this time either.”

Trump routinely criticizes Fed Chairman Jerome Powell for raising rates and then failing to lower them.

“The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt,” Trump tweeted on Wednesday. “It is only the naïveté of Jay Powell and the Federal Reserve that doesn’t allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of ‘Boneheads.’”

Kudlow rejected the idea the American economy is headed for recession, an argument that could justify the rate cuts Trump has called for. He made his comments after briefing House Republicans behind closed doors on the state of the economy before the 2020 elections.

“I conveyed my optimism about the economy,” he said. “I don’t see a recession.”

He said that the administration is focused on providing another round of tax cuts to the middle class as early as next year, but the cut is not intended as a stimulus to ward off a downturn.

Asked whether recent positive economic data in the U.S. undermined the case for Fed easing, Kudlow declined to answer.

American retail sales advanced in August by more than forecast, according to Commerce Department figures released Friday. Consumer sentiment, measured by the University of Michigan’s preliminary sentiment index also rebounded in September after a steep drop.

The combination reassured economists that the American consumer was still carrying forward the longest U.S. economic expansion on record.


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