Despite Trump criticism, Fed sees need for more rate hikes

Despite Trump criticism, Fed sees need for more rate hikes

Despite Trump criticism, Fed sees need for more rate hikes

"The fed raising interest rates too quickly, she's too independent", - he said and noted that he does not like what makes the Chairman of the regulator Powell, but to intervene in the policy of the fed, the President can not. Other officials said they would oppose a restrictive rate policy without clear signs of an overheating economy and rising inflation.

Powell has so far brushed aside Trump's criticism, portraying the central bank's actions as a move to normalize monetary policy in an "extraordinary" economy and saying the Fed was sticking with its strategy of gradual rate increases.

Trump has broken with standard presidential practice by openly commenting on rate hikes, most recently on Tuesday, when he told Fox Business News: "My biggest threat is the Fed".

Policy makers have also estimated a long-run rate between 2.5 percent to 3.5 percent, but Fed chair Powell has previously highlighted the uncertainty about where the longer-run level actually sits.

Experts on the Fed point out that if Mr. Trump was serious about using this method, he would have already done so. He added that productivity could well break above a 1-per-cent average growth rate in recent years owing to investments in technologies and a possible rise in labour participation. The Fed has always been seen as needing to remain free of political pressure to properly manage rates, and presidents have generally respected that independence, especially publicly. Trump blamed the Fed's string of rate hikes for the market turmoil. Responding to a moderator question, he said he thinks the Fed could nudge rates higher "for a period of time" without moving into restrictive territory.

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"I think the Fed has gone insane", he said. He is on record urging the central bank to focus on "what's good for the country" instead of raising rates, which can hurt consumers because it increases the costs of borrowing.

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"It has a long history of Fed governors ignoring what a president says, and I think this is likely to be the case here", said Kroszner, now an economics professor at the University of Chicago Booth School of Business at an global banking conference in Bali last week. The Fed needs to push interest rates up by at least another full percentage point to prevent asset bubbles or an unwelcome acceleration in inflation.

They also noted that some businesses said they were investing less in the energy sector due to tariffs on steel and aluminum imports, part of an array of trade conflicts the Trump administration has pursued with trading partners. Similarly, the central bank can tighten the economy and lower the economic growth rate.

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

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