Economist says the Fed will ultimately determine direction of stock market

Economist Samuel Hammond says the actions of the Federal Reserve will ultimately determine the course of the volatile stock market during the Trump administration.

"I think going forward, a lot depends on what the Federal Reserve does," Hammond, director of poverty and welfare policy at the Niskanen Center, told Hill.TV's Jamal Simmons on "What America's Thinking" on Friday. 

"Under Jerome Powell, Trump's Fed nominee and chairman, there was a stabilization and inflation expectation, but with the most recent rate hike... the expectations for future inflation have fallen a lot," he continued. 

"The yield curve, which is how we look at interest rates over time has flattened and those are sort of leading indicators of a potential dip back into recession, and so it all hangs in the balance of what the Fed decides to do when they meet next," he said. 

Trump has blasted the Fed's rate increases and called on the central bank to maintain low, stimulatory interest rates despite the relatively strong economy.

Trump touted the stock market when it was booming, but markets slide in 2018. Last year was the worst year for U.S. stocks since 2008.

The president has blamed the Fed, as well as Democrats and an unspecified “glitch” on recent stock losses. But analysts say the sell-off is due to trade tensions and fears of an impending economic slowdown.

— Julia Manchester