Despite Trump criticism, Fed sees need for more rate hikes

Lloyd Doyle
October 18, 2018

At 0640 GMT the rand was 0.26% weaker at R14.2900 per dollar, having risen to R14.1050, its best since 1 October, as the NY session kicked off before the release of the Fed minutes breathed life back into the greenback rally.

President Trump has recently renewed criticism of the Fed and its interest rate hikes.

Last week, Trump criticized the USA central bank twice, saying it was raising interest rates so swiftly that it threatened the country's economic health.

In minutes from last month's central bank rate-setting meeting, which unanimously agreed a third rise of the year, policymakers said further rate hikes "would most likely be consistent" with current economic indicators.

Fed Chairman Jerome Powell was nominated by Trump and approved by a Republican-controlled Senate earlier this year. Last week he slammed the central bank as "out of control" and said it was "going loco", blaming its monetary policy for a sell-off in the stock market. The target range for the federal funds rate, now at 2 percent to 2.25 percent, is low by historical standards.

Trump's criticisms mark a departure from the practices of his recent predecessors.

Trump has said he is not trying to oust Powell, whom he appointed to replace former Chair Janet Yellen. "Obviously, presidents can speak out if they choose to and give their opinions about policy". At that point, the policy rate would be at 3.4 percent, according to the median of Fed officials' individual forecasts.

Others said that, to avoid creating asset bubbles or having inflation run above the Fed's 2 per cent target for too long, the central bank would have to raise rates "above their assessments of its longer-run level".

"The man has a point", Neil Dutta, an economist at Renaissance Macro Research LLC in NY, wrote in a note to clients after Trump's remarks were made public. But the courts ruled in a case decades ago involving the Federal Trade Commission that this language has to involve more than a policy disagreement between the president and the Fed.

In Tuesday's interview, though, Trump said of his other nominees for the Fed, "I put a couple of other people there I'm not so happy with too but for the most part I'm very happy with people".

Other reports by Iphone Fresh

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