Despite Trump criticism, Fed sees need for more rate hikes

19 October, 2018, 00:06 | Author: Regina Silva
  • Dollar Benefits More from Euro and Pound Uncertainty than FOMC

U.S. Federal Reserve Chairman Jerome Powell holds a news conference following a two-day Federal Open Market Committee (FOMC) policy meeting in Washington, U.S., September 26, 2018.

US President Donald Trump reignited his controversial criticism of the US central bank Tuesday, calling the Federal Reserve his "biggest threat".

So far this year, policymakers have already voted to hike short-term interest rates three times, and are poised to do so again in December, staying the course they laid out late last year.

"Participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term", the Fed's minutes said.

US stock prices recovered some earlier losses but were still down for the day following the minutes.

Trump has blamed the market's big sell-off on rising rates and has described the Fed as being "out of control".

This would move USA interest rates slightly above what policymakers say is "neutral" - that is, neither slowing nor speeding the economy - but some participants said the Fed would need to go even further than that. U.S. Treasury yields were little changed.

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"Because the Fed is raising rates too fast". Following the rate increase in September, Trump said he was "not happy" with the decision.

Past U.S. presidents have been reticent to criticize the central bank because its independence is seen as important for economic stability.

But, amid brisk American expansion, some Fed policymakers also warned of looming dangers to the world economy, such as the potential for a strengthening United States dollar and possible contagion from sputtering emerging markets, according to minutes from the Fed's most recent meeting three weeks ago.

They also noted that some businesses said they were investing less in the energy sector due to the imposition of import tariffs on steel and aluminum, part of an array of trade policy conflicts the Trump administration has pursued.

The U.S. economy has been growing more quickly this year than many economists believe is possible without generating higher inflation, with the jobless rate at its lowest level in decades.

The minutes showed that "almost all" policymakers agreed it was time to stop saying they were stimulating the economy.

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