United States interest rate rises are necessary, says International Monetary Fund chief

US President Donald Trump addresses supporters during a campaign rally at Mayo Civic Center in Rochester Minnesota

"We know the Fed is independent".

An hour later, Trump was back to calling out the Fed and maintaining they are "making a mistake", making his case once again that the Federal Reserve should stop increasing interest rates. "They're raising interest rates, and it's ridiculous".

Add it all up, and it means the world's most savvy investors are betting that the USA economy will keep growing at a healthy clip, without inflation emerging, but that the Fed will have to keep raising rates well above current levels in order to prevent that inflation.

"I wonder today whether Trump really has some buyer's remorse with respect to selecting Powell as his Fed chairman, because that was a odd pick", Moore said.

Trump was briefed on the market turmoil earlier in the day, a White House official said. "I think what they're doing is wrong", Trump said.

Gradual rate increases - moving the overnight federal funds rate over the next year and a half or so from between 2 and 2.5 percent now to around 3.4 percent - would slow the economy a bit, but keep inflation in check during a record-setting era of recession-free growth spanning the Obama years and Trump's first term.

Inflation, which had been worrisomely low in Mr Evans' view, is now at the Fed's 2-per cent target. The Fed is an independent body and presidents in recent decades have avoided commenting publicly on its actions.

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"He has never attacked the Fed's plan or strategy, " Kudlow told reporters on the White House lawn Thursday.

The unemployment rate in September dipped to 3.7 percent, a level not seen in almost half a century, while an inflation report on Thursday indicated the pace of price increases remained under control around the Fed's target. "He has never interfered with that".

On Friday, federal data showed that the US jobless rate fell to 3.7 percent in September, it's lowest point since 1969. The S&P 500 remained near the lowest since July on Thursday, while the Nasdaq 100 rallied.

International Monetary Fund (IMF) managing director Christine Lagarde.

Trump has levied or threatened tariffs on goods from economies around the world, notably China, but also on traditional allies such as the European Union. The IMF projections don't take into account Trump's threat to expand the tariffs to effectively all of the more than $500 billion in goods the USA bought from China previous year.

Naeem Aslam, chief market analyst at Think Markets, said: "We have not experienced anything like this since Brexit and if you look at the Nasdaq, it becomes clear that the sell-off was actually triggered by the technology stock". Powell said last week he expects to stick with the current path of gradual interest-rate hikes while monitoring risks in the economy. That means investors are demanding more compensation than they did a few weeks ago for tying their money up for many years. Higher interest rates could increase his debt payments considerably.

Even the sharp rise in long-term bond yields that has spooked equity investors this week is a sign of an economy working more normally than it has since the financial crisis.