White House wants Fed to cut rates: advisor

[WASHINGTON] White House economic advisor Larry Kudlow on Friday urged the Federal Reserve to cut interest rates to protect the US economy.

Mr Kudlow told CNBC that it was necessary to reduce rates as a "protective measure," after earlier being quoted by Axios as saying the Fed should "immediately" cut rates by half a percentage point.

"We just don't want that threat" of higher rates, the advisor said, adding that this reflects President Donald Trump's view.

"There is no inflation out there, so I think the Fed's actions were probably overdone," he said, referring to its decision to raise rates four times in 2018, with the last and most controversial increase coming in December.

Referring to the slowdown in the global economy that could threaten US growth, Mr Kudlow referred to the "eurozone, virtually in a recession. China, very, very very soft as we negotiate our trade. Troubles in Latin America."

"We don't want to threaten this great recovery," he said.

"We are, as everyone else in the world, aware of some of these external threats from around the world," he said, adding that Mr Trump also wants the Fed to stop cutting its Treasury bill portfolio.

The advocacy of a sharp rate cut echoes the position of Stephen Moore, a conservative economist whom Mr Trump has tapped to join the Fed.

Most economists and institutions - with the exception of the White House - predict a slump in US growth both this year and in 2020.

The Fed recently reduced its growth projection to 2.1 per cent for 2019 and 1.9 per cent for next year, but the Trump administration says the economy will grow by 3.2 per cent this year.

The Fed's Monetary Committee left rates unchanged last week and gave up its plans for increases to the cost of credit for this year.

AFP