Mnuchin says Fed not to blame for market rout that’s part of a ‘normal correction’

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Treasury Secretary Steven Mnuchin attempted early Thursday to soften his boss, Donald Trump’s, harsh criticism of the Federal Reserve for a role in a midweek rout that handed U.S. stocks their biggest drop since February and triggered an equities retreat around the globe.

“I don’t think there was any new news that came out of the Fed today that wasn’t there beforehand,” Mnuchin said from the sidelines of an International Monetary Fund meeting of global finance officials and central bankers in Indonesia, according to CNN.

“Markets go up. Markets go down,” Mnuchin said, according to the report. “I see this as a normal correction.” He said solid U.S. economic fundamentals provide some cover.

Stock futures YMZ8, -0.85% were down some 200 points early Thursday, indicating more selling in store.

Trump stepped up his criticism of the Fed in a campaign rally late Wednesday, blaming the central bank’s rate-hiking efforts for stock-market weakness. Some analysts argue the Fed’s expected rate path is overly aggressive, while others contend strong underlying economic fundamentals justify the central bank’s attempts to continue to remove the easy monetary policy that followed the financial crisis.

The Fed has already increased rates three times in 2018 and is expected to lift benchmark rates a fourth time in December, as well as continue its gradual tightening trend in 2019, according to the Fed’s own forecasts.

Stock markets have been rattled in part by reaction to rising bond market yields, meaning steeper borrowing costs for businesses, as fixed income investors adjust to a higher interest-rate climate. A bond-market selloff drove the yield on the 10-year U.S. Treasury TMUBMUSD10Y, +0.45% above 3.26% earlier this week for the first time since April 2011. Yields had stabilized somewhat by Thursday.

Check out: What Trump’s tirade against ‘loco’ Fed means for the markets

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