Despite Trump criticism, Fed policymakers see need for more rate hikes

  • Despite Trump criticism, Fed policymakers see need for more rate hikes

Despite Trump criticism, Fed policymakers see need for more rate hikes

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

But, amid brisk American expansion, some Fed policymakers also warned of looming dangers to the world economy, such as the potential for a strengthening USA dollar and possible contagion from sputtering emerging markets, according to minutes from the Fed's most recent meeting three weeks ago. The display of unanimity could bolster expectations the central bank will raise rates a fourth time this year in December.

The Fed has raised interest rates six times during the Trump administration, three of those times under current Fed chief Jerome Powell, who was nominated by Trump. Trump says he knows the Fed is independent, but he thinks interest rates are rising too quickly.

However at meetings of the International Monetary Fund in Bali, Indonesia last week, China's central bank governor Yi Gang said that Beijing would not engage in "competitive devaluation" or use the exchange rate as a "tool to deal with trade frictions".

For now, because it remained hard to tell where the currently strong economy would settle in the years ahead, the Fed should continue with its "stable, gradual, and predictable" approach of about one rate hike a quarter, he said.

But Trump's complaints don't seem to have fazed the honchos at the world's most important central bank.

As well as making life more hard for U.S. exporters, a stronger greenback also raises the borrowing costs of many heavily-indebted emerging market economies, such as those in Latin America which have high levels of dollar-denominated borrowing.

Still, a "couple" of participants said they would oppose this unless clear danger signs - an overheating economy and mounting inflation - were to arise.

Markets fear currency crises in Turkey, Argentina and other emerging market economies could spread beyond their borders - something that could be sparked as investors pull out to take advantage of higher rates in the US.

"The more the economy's potential growth increases, the more gradual we can be in our removal of monetary-policy accommodation", he said.

Washington has slapped punishing tariffs on about half of all China's goods exports to the United States, with talks to resolve the matter at an apparent impasse.

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