Fed signals more rate hikes despite emerging market 'stress'

  • Fed signals more rate hikes despite emerging market 'stress'

Fed signals more rate hikes despite emerging market 'stress'

The rand retreated early on Thursday after minutes from the US Federal Reserve's September meeting struck a hawkish tone, draining some of the enthusiasm for emerging currencies that lifted the local unit to a two-week peak.

U.S. President Donald Trump heaped more criticism on the Federal Reserve in an interview with Fox Business Network on Tuesday, extending his discontent beyond its chairman, Jerome Powell, whom he has frequently critiqued in public.

The central bank expects to raise its key lending rate again in December - its ninth increase since 2015 - and three more times next year.

Still, the minutes showed that, for the moment at least, American policymakers were largely in agreement about the near future - despite the increasing heat from the president, who fears higher rates will derail his economic agenda.

Fed Chairman Jerome Powell has said the central bank will monitor interest rates to avoid raising them too quickly, which could hamper US growth.

USA stock prices recovered some earlier losses but were still down for the day following the minutes.

The Fed minutes showed some members were anxious by the instability in emerging markets, such as Venezuela and Argentina, warning it could "spread more broadly through the global economy and financial markets".

U.S. stocks closed slightly lower and U.S. Treasury yields gained a bit as traders continued to bet on further rate hikes ahead.

Trump says he knows the Fed is independent, but he thinks interest rates are rising too quickly.

Though the minutes did not refer to any of Trump's criticism, its message of further rate increases suggests that policymakers are not fazed by it.

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.

Some investors say that, after years of easy money, pockets of risk have built up throughout the global economy - raising the chances that a bubble could burst or banks could see significant defaults on debt as borrowing costs begin to increase.

The U.S. economy has been growing more quickly this year than many economists believe is possible without generating higher inflation, with the jobless rate at its lowest level in decades.

The minutes showed that "almost all" policymakers agreed it was time to remove that language.