Trump voices confidence in Mnuchin and the Fed after stock market tailspin

President Trump expressed confidence in the Treasury secretary, the Federal Reserve and the U.S. economy Tuesday, moving to calm financial markets further roiled after Bloomberg News reported that the president had discussed firing the central bank’s chairman over the raising of interest rates.

Trump, asked whether he had confidence in Treasury Secretary Steven T. Mnuchin, said, “Yes I do, very talented guy, very smart person.” Asked about Fed Chairman Jerome H. Powell, Trump said that the central bank was “raising interest rates too fast” but that he had “confidence” that the Fed would “get it pretty soon.”

The president — answering reporters’ questions at the White House after addressing members of the U.S. armed forces on a Christmas Day video conference call — said the Fed is raising borrowing costs because the “economy is doing so well,” adding that U.S. companies are having “record kinds of numbers” and that it’s a “tremendous opportunity to buy.”

The remarks represent Trump’s first public expression of support for Mnuchin and Powell since people familiar with the matter told Bloomberg News last week that the president had discussed dismissing the Fed chief, whom Mnuchin recommended for the job. Before Tuesday’s comments, one person familiar with the president’s thinking said Trump had also weighed dismissing Mnuchin, while another said Mnuchin’s tenure may depend in part on how much markets continue to drop.

The Standard & Poor’s 500 index tumbled 2.7% on Monday in its worst pre-Christmas trading session on record. The gauge is on the brink of a bear market, just shy of its first 20% decline since 2009.

Blaming the Fed

As stocks rose for most of Trump’s first two years in office, the president frequently pointed to the gains as a sign of his success. Since they began falling, he’s often blamed the Fed and its interest rate hikes, even though investors are becoming increasingly concerned about the effect of the administration’s trade battles with China and Europe.

Trump’s remarks Tuesday contrasted with his Monday tweet that said: “The only problem our economy has is the Fed. They don’t have a feel for the Market, they don’t understand necessary Trade Wars or Strong Dollars or even Democrat Shutdowns over Borders.”

U.S. markets were closed Tuesday for Christmas, and when U.S. stock-index futures resumed trading in the afternoon, they whipsawed between losses and gains. March contracts on the S&P 500 index were up 0.3% shortly after 4 p.m. Pacific Time; less than an hour earlier, they were down as much as 1.1% in volatile trading.

In Japan on Tuesday, the benchmark Nikkei 225 stock average tumbled 5% into a bear market.

One reason stocks have been declining is the partial U.S. government shutdown over Trump’s demand for billions of dollars for a wall on the U.S.-Mexico border. On that issue, Trump gave little ground Tuesday, saying that the agencies won’t reopen “until we have a wall, a fence, whatever they’d like to call it.”

Trump’s comments on Mnuchin followed the secretary’s convening of an emergency meeting with top U.S. financial regulators Monday and his call with executives from six major banks the previous day. The Treasury Department issued a statement Sunday saying banks have adequate liquidity for lending, surprising investors who hadn’t even been worried about banks’ liquidity.

Stance on Powell

The president’s remarks on the Fed could potentially alleviate concern that Trump would try to remove Powell, even if the president didn’t explicitly say that he won’t fire the central bank chief. Mnuchin said in a pair of tweets Saturday evening that he’d spoken with the president about the matter, and he quoted Trump saying he didn’t believe he had the authority to remove the Fed chairman.

“Well, we’ll see,” Trump said Tuesday when asked about his confidence in Powell. “They’re raising interest rates too fast. That’s my opinion. But I certainly have confidence. But I think it will straighten. They’re raising interest rates too fast because they think the economy is so good. But I think that they will get it pretty soon. I really do. I mean, the fact is that the economy is doing so well that they raised interest rates, and that is a form of safety in a way.”

Trump’s comment about safety may be a reference to the idea that higher interest rates would give the Fed more room to cut in order to cushion the economy in case of a downturn.

Sebenius writes for Bloomberg.