Fed risks Trump's fury over rate increases

Mae Love
October 19, 2018

Critics have expressed concern that his continual attacks on the Fed, which began in the summer, threaten its need to operate free of political pressure from the White House or elsewhere to properly manage interest rate policy.

The People's Bank of China governor Yi Gang said that China's stock valuations are not in line with sound economic fundamentals, and that the central bank will roll out targeted measures to help ease corporate financing problems and encourage commercial banks to boost lending to private firms. "That is where the crux of the debate will be", as policymakers spar over how aggressively to hold back growth if unemployment remains historically low.

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 continued "gradual" rate increases are regarded as insurance against that possibility. The display of unanimity could bolster expectations the central bank will raise rates a fourth time this year in December.

"I see many reasons to be optimistic about the growth of the potential capacity of the economy over the next few years", which would sustain growth without overheating the economy, Mr. Quarles said.

Fed officials raised their benchmark federal-funds rate a quarter percentage point last month, to a range between 2% to 2.25%.

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And more support steps look likely, analysts say, as China starts to bear the full brunt of the trade war with the United States. Retail sales in China have remained at relatively the same rates since a year ago , NBS said.

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Still, as U.S. interest rates have risen, the United States dollar has strengthened further, which makes American exports more expensive.

The possibility of a recession in the next year or two has become a focus of debate as the current USA recovery nears the one-decade mark. Bullard also feels the Fed should not "pencil in" rate increases far into the future because of the uncertainty around forecasts, and the confusion that can cause among investors and households.

Bullard is not now on the Fed's rate-setting committee but will join it in 2019.

Several participants at the central bank's September rate-setting meeting expressed support for raising the base rate above a neutral level to keep inflation in check, according to minutes released last night.

U.S. central bankers see no reason to pause the current course of gradual rate hikes that have infuriated President Donald Trump and some even say the Federal Reserve may soon need to slow the economy, according to meeting minutes released Wednesday.

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