Trump widens Fed critique, calls it 'my biggest threat'

Mae Love
October 19, 2018

Every policymaker backed the Fed's September rate increase, according to the minutes of the Sept. 25-26 meeting, published Wednesday.

Despite fierce blowback from President Trump, the Federal Reserve's policymakers unanimously agree they should keep hiking interest rates to cap inflation.

According to the minutes: "A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level". The median view of all Fed officials was that rates should be increased one more time this year and three times next year and a final quarter-point rate hike in 2020.

In an interview with Fox Business Network Tuesday, Trump continued his on-going criticism of the Fed for its interest rate increases, which he thinks are slowing the economy.

Wall Street, which had struggled through much of the day, closed slightly lower, with stocks paring losses after the minutes' release.

Treasury yields were little changed.

Furthermore, "some" at the meeting said that risks grew as the USA economy increasingly outpaces its rivals' more sluggish growth "because of the potential for further strengthening of the dollar".

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The US Federal Reserve has signalled there will be another rise in interest rates this year, despite opposition from the White House and growing concerns about the impact on emerging market economies.

Trump said he doesn't speak with Chairman Jerome Powell because of the Fed's political independence but said. Rather, some of the central bankers appeared to see some indications of a stronger US economy.

Still, policymakers noted that the relative weakness of the worldwide economy could create "potential for further strengthening of the USA dollar", a factor that could weigh on US exports.

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.

Further rate hikes "would most likely be consistent" with the current period of firming inflation and historically low unemployment, according to the minutes released Wednesday.

Despite his criticism of the Fed's policymaking, Trump's picks have been seen as representing the mainstream of economic thinking about how a central bank should manage interest rates.

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