Fed plans to keep hiking interest rates despite Trump blowback

Galtero Lara
Octubre 19, 2018

In the minutes it says "a couple" of policymakers stated that they would not be in favour of adopting a restrictive policy stance without "clear signs of an overheating economy".

President Donald Trump is criticizing the Federal Reserve for raising interest rates too quickly.

Further rate hikes "would most likely be consistent" with the current period of firming inflation and historically low unemployment, according to minutes from the Federal Reserve's most recent meeting three weeks ago.

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

Trump's comments Tuesday came on a day when the stock market staged an enormous comeback - its biggest one-day rally in six months - on the strength of healthy earnings from financial and health care companies and encouraging reports on the economy. Analysts have pointed to rising interest rates, which can make stocks a less attractive investment.

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Every Fed policymaker backed the central bank's September decision to raise the target policy rate to between 2 percent and 2.25 percent, according to minutes of the Sept. 25-26 meeting, published Wednesday. Powell, who was tapped as Fed chairman by Trump after he decided not to offer Janet Yellen a second term, has said the central bank will not be influenced by outside criticism but will continue to do its job of managing the economy to promote maximum employment and stable prices.

The Fed released an updated economic forecast at the September meeting. The display of unanimity could bolster expectations the central bank will raise rates a fourth time this year in December. Traders of futures contracts tied to the Fed's policy rate see rates topping out at about 3 percent.

Under Powell, the Fed has been gradually raising rates as the economy has strengthened as a way to prevent a run-up in inflation. The minutes noted that the tax cuts Trump had pushed through Congress late last year along with the spending increases Congress approved at the beginning of this year were boosting economic activity.

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.

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