Federal Reserve signals September interest rate hike

Federal Reserve signals September interest rate hike

Troy Powers
August 23, 2018

U.S. President Donald Trump said on Monday he was "not thrilled" with Federal Reserve Chairman Jerome Powell for raising interest rates and accused China and Europe of manipulating their respective currencies.

The USD selling pressure abated, at least for the time being, near the key 95.00 psychological mark, after Dallas Fed President Robert Kaplan supported prospects for three or four more "gradual" interest-rate hikes before the central bank pauses to assess the outlook for the economy.

Atlanta Fed President Raphael Bostic said on Monday he was maintaining his expectation for one more interest rate hike this year, as trade tensions and worldwide events add some downside risk to an otherwise strong United States outlook.

President Trump is preparing to slap import duties on a further $200 billion of Chinese goods, meaning that his sanctions would cover almost half of imports from the country. Trump went on to say he wanted more help for the economy from the Fed.

Presidents have historically avoided commenting on Fed policies. He said during an interview Monday that other countries get help from their central banks during trade disputes with the U.S.

The Fed has raised interest rates twice this year already and is expected to do so again next month with consumer price inflation rising to 2.9 percent in July, its highest level in six years, and unemployment at 3.9 percent, the lowest level in about 20 years.

US stocks fell modestly after the minutes were published while the dollar.DXY weakened against a basket of currencies.

There are a total of seven governors on the Fed Board, all of whom have a vote on setting interest rates, and Trump still has one remaining vacancy to fill should his current slate of nominees win approval from the Senate.

Trump since July has repeatedly criticised the Fed, an independent body that is not controlled by Congress or the president.

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The president's top economic advisers have repeatedly urged Trump not to attack the Fed.

In the midst of a long riff on the economy, Mr. Trump said that he had expected Mr. Powell to adhere to an easy-money monetary policy, by keeping interest rates low, when he nominated Mr. Powell in November to succeed Janet L. Yellen.

The Fed is raising rates in an effort to keep prices stable and to prevent the economy from overheating, but Trump has complained the increased rates are obstacles to economic growth.

When Powell speaks Friday at an annual global central bankers meeting in Jackson Hole, Wyoming, Trump's comments may prompt some uncomfortable questions, "but do not alter the economic backdrop or Fed policy going forward", economists for RBC Capital Markets wrote Tuesday.

The president nominated Powell a year ago to replace former Fed Chair Janet Yellen. "As he said he considers the Federal Reserve Board Chair Jerome Powell a very good man and that he is not interfering with Fed policy decisions".

"I am not happy about it".

"We do our work in a strictly nonpolitical way, based on detailed analysis, which we put on the record transparently, and we don't take political considerations into account", Powell said in the interview.

Trump selected Powell for the job previous year from a short list of several prominent central bankers, praising Powell for his "wisdom" and "leadership" skills when he nominated him formally in November.