(Bloomberg) -- What’s the biggest risk to the world economy today? It’s the U.S. president, Philippine central bank governor Benjamin Diokno told a panel discussion in Singapore, with the audience bursting into laughter at his candid answer.
A former economics professor who took the helm of the central bank in March, Diokno said the U.S. economy is growing due to the tax cut enacted under President Donald Trump, but the policy will exacerbate debt in the long run.
The Filipino central banker may have a reason for his quip: When the U.S. sneezes, the rest of the world catches a cold, as the saying goes. The U.S.-China trade war -- with Trump objecting to many of the policies that have driven China’s rapid rise to become the world’s second-largest economy -- has rippled through emerging Asia and threatens to start a global recession.
“Whatever Trump does is really driving the markets. It affects everyone else,” said Michael Ricafort, an economist at Rizal Commercial Banking Corp. in Manila.
Trumpian Tweet
Trump, who wants to see stronger U.S. economic growth ahead of his re-election bid next year, has been outspoken in favoring more aggressive monetary-policy easing.
Last week he tweeted that the U.S. Federal Reserve should cut rates to zero or less. On Wednesday, after the Fed lowered its benchmark interest rate for a second meeting in a row, cutting by a quarter-point to 1.75%-2%, Trump was unimpressed: “No ‘guts,’ no sense, no vision!” he tweeted.
Fed chief Jerome Powell has stressed the need for the U.S. central bank to remain independent from government pressure. Analysts have described Wednesday’s move as a “hawkish cut,” emphasizing that the Fed essentially sees these moves as insurance for an economy that remains basically healthy. Three Fed members dissented from the decision to cut, suggesting an unusual amount of discord on the policy board.
Speaking on a panel at the Milken Institute Asia Summit in Singapore, Diokno said Trump’s pressure on Powell is “unfair” and governments should respect central bank independence.