During one of its most important meetings in recent history, the European Central Bank, on Thursday, announced a sweeping round of stimulus to boost the European Union’s stuttering economy, cutting interest rates to their lowest level ever.
The ECB said it cut rates by 10 basis points to -0.5 percent, from -0.4 percent, drawing ire from President Trump, who had urged the Federal Reserve in a tweet earlier this week to follow suit and drop interest rates to zero -- or possibly even below zero.
"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. "INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term."
Doing so, he said, would be possible because of the country’s “great currency, power, and balance sheet.”
He repeated his complaint again on Thursday, saying that while the ECB acted quickly to protect its economy from uncertainties surrounding the U.S.-China trade war and Brexit, the Fed “sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”
The U.S. central bank lowered the benchmark federal funds rate in July for the first time in nearly a decade, citing “global developments in the economic outlook as well as muted inflation pressures." At the time, Fed officials did not say whether they anticipated additional cuts, but warned it was not the beginning of an aggressive rate-cutting series.
Since then, however, global economic conditions have significantly weakened: Manufacturing contracted in the U.S. for the first time in three years; the spread between two-year and 10-year Treasury yields inverted, a common harbinger of an impending recession; and employment data in the U.S. suggested the labor market is softening, all amid heightened trade tensions between the U.S. and China.
And this week, JPMorgan and Chase CEO Jamie Dimon said the nation’s biggest bank is preparing for the possibility of rates falling to zero.
"I don't think we'll have zero rates in the U.S. but we're thinking how to be prepared for it as a normal course of risk management," he said during a Q&A at Barclays Global Financial Services Conference on Tuesday.
Although Wall Street widely expects the Federal Open Market Committee to make another quarter-point cut during its meeting next week, borrowing costs will almost certainly remain well above zero (currently, the range is set between 2 percent and 2.25 percent) in the short term.