SD Senator Mike Rounds; Federal Reserve Right to Raise Rates

Cheryl Sanders
October 19, 2018

USA 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.

The Pound-to-Dollar rate could benefit from the Federal Reserve (Fed) push to raise its interest rate above the "neutral" level in the year ahead, because analysts are saying such a move will be a bitter pill for the USA greenback to swallow.

But former Fed vice chairman Stanley Fischer told CNBC Thursday that the central bank might be tempted to raise rates more aggressively to show that it is politically independent. The Fed hiked short-term interest rates three times this year and plans to do so again before 2019. "And maybe it's right, maybe it's wrong, but I put him there". "I'm not blaming anybody", he said, acknowledging he may have made a mistake in choosing Powell for the post. This was less than a year after the Fed ended the QE program.

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.

As opposed to a mild brake on the economy, Bullard argued that rates that high "would be moving quite a ways into restrictive territory". A stronger dollar is usually not supportive of the USA manufacturing industry.

In rewriting the North American trade pact this year, Washington, Ottawa and Mexico City agreed any member could withdraw from the new treaty if any other member moved to enter a trade agreement with a "non-market" economy, a thinly veiled reference to China.

"I think the Fed has gone insane", he said. This guy knows what he's doing. "He's extremely competent. His competence is such that I don't worry about where the Fed's going".

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.

He said his optimism about the economy is partly due to factors he thinks will boost productivity, which will allow continued growth without fueling inflation.

The Fed minutes did not include any discussion of Trump's attacks.

"Participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term", said the minutes of the Fed's September 25-26 policy meeting released on Wednesday. In particular, tariffs on aluminum and steel were cited as reducing new investment in the energy sector.

Cohn responded to reports he left the administration over trade policy, and admitted - even if indirectly - he is opposed to President Trump's use of tariffs to create leverage for better trade deals for America.

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