WASHINGTON, July 29 (Xinhua) -- U.S. President Donald Trump ratcheted up criticism against the Federal Reserve on Monday, saying a small rate cut is not enough to maintain the economic expansion.
"The Fed 'raised' way too early and way too much," Trump tweeted. "Their quantitative tightening was another big mistake."
His comments came as it is widely expected that the Fed will cut the benchmark interest rate at its policy meeting scheduled for Tuesday and Wednesday.
"A small rate cut is not enough," the president said, as the market has been pricing in a 80 percent possibility for rate cut when the Fed's rate-setting Federal Open Market Committee convenes the policy meeting this week.
According to CMP Group's Fedwatch tool that tracks market expectations for the size of rate cuts, the market is predicting an around 73 percent chance for a lowering of the rate by 25 basis points, while the likelihood of a 80 basis point cut is about 27 percent. The federal funds rate is now set in a target range of 2.25 percent to 2.5 percent.
Fed Chairman Jerome Powell, whom Trump often takes aim at and whom he said he can demote, told congressional hearings earlier this month that "the uncertainties around global growth and trade continue to weigh on the outlook."
Powell added that muted inflation could prove more persistent, which "strengthened the case for a somewhat more accommodative policy," an indirect reference to rate cuts.
Joseph Gagnon, senior fellow at the Peterson Institute for International Economics, a Washington think tank, gave a more prudent note on the rate cut, saying "a small rate cut" is possible at the upcoming meeting.
In a recent interview with Xinhua, Gagnon put the odds of a 25 basis point cut at 70 percent, saying that even viewing that as "a done deal seems extreme." He said there is "no particular reason" for the central bank to cut rate by 80 basis points this time.
The economist said given that the effect of the Trump administration's fiscal stimulus is "pretty much over," U.S. economic growth will slow to about 2 percent this year. He said Fed officials "think that maybe they need to actually cut 25 or 80 basis points" to secure the 2-percent growth rate.