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Federal Reserve raises interest rates despite pressure from Trump Federal Reserve raises interest rates despite pressure from Trump
(about 2 hours later)
The US Federal Reserve raised interest rates again on Wednesday despite intense, and unprecedented, pressure from Donald Trump to leave rates unchanged.The US Federal Reserve raised interest rates again on Wednesday despite intense, and unprecedented, pressure from Donald Trump to leave rates unchanged.
After a two-day meeting the central bank announced rates would rise a quarter of a percentage point, to a range of 2.25% to 2.5%, the ninth such move since late 2015 and further signaling the Fed’s confidence in the US economy.After a two-day meeting the central bank announced rates would rise a quarter of a percentage point, to a range of 2.25% to 2.5%, the ninth such move since late 2015 and further signaling the Fed’s confidence in the US economy.
In a statement the Fed said the labour market had continued to strengthen and that “economic activity has been rising at a strong rate.” The closely watched Fed fund rates is used to benchmark interest rates worldwide, and the Fed’s move is parsed by investors worldwide for signals about the strength of the US economy.
At a press conference Fed chairman Jerome Powell said the US economy remained strong overall but added that some “cross-currents” had emerged. “Despite this robust economic backdrop and our expectation for healthy growth, we have seen developments that may signal some softening,” said Powell, signaling that the pace of rate increases may slow next year.
Why are markets falling, and are we heading for global recession?Why are markets falling, and are we heading for global recession?
Powell said that while US growth remained strong, globally economic growth had become more patchy. He said the Fed was carefully watching “event risks” – including Brexit – for their potential impact on the US. But he added US financial institutions are well prepared for any outcome of the UK’s exit from the EU and that the final decision should not have major implications for the US.
“Honestly, it shouldn’t have major implications for the United States, but there’s a lot of uncertainty because it’s not something that’s happened before,” he said.
Trump has waged a public campaign to halt further rate rises, a highly unusual move for a president, calling the increases “crazy” and “foolish” and arguing the Fed’s policy was “the “biggest threat” to the US economy, larger than the administration’s trade dispute with China.Trump has waged a public campaign to halt further rate rises, a highly unusual move for a president, calling the increases “crazy” and “foolish” and arguing the Fed’s policy was “the “biggest threat” to the US economy, larger than the administration’s trade dispute with China.
Last month Trump told the Washington Post he was “not even a little bit happy” with his selection of Jerome Powell to chair the Fed. On Tuesday, as the Fed was meeting, Trump pressed the Fed to hold off from “making another mistake”. Last month Trump told the Washington Post he was “not even a little bit happy” with his selection of Powell to chair the Fed. On Tuesday, as the Fed was meeting, Trump pressed the Fed to hold off from “making another mistake”.
He pointed to a Wall Street Journal editorial that called for a pause in rate hikes, arguing that US growth may be slowing, Trump’s tariff disputes have dampened trade and sales of homes and cars, both highly impacted by rate rises, have dipped.He pointed to a Wall Street Journal editorial that called for a pause in rate hikes, arguing that US growth may be slowing, Trump’s tariff disputes have dampened trade and sales of homes and cars, both highly impacted by rate rises, have dipped.
I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!
In spite of Trump’s criticism the Fed voted again for another small increase in rates. All four of the Fed’s rate increases this year have been approved on a unanimous vote.In spite of Trump’s criticism the Fed voted again for another small increase in rates. All four of the Fed’s rate increases this year have been approved on a unanimous vote.
The Fed is charged with helping to keep unemployment low and controlling inflation. The latest rise comes as the US unemployment rate has dropped to levels unseen since 1969 and inflation has remained low. However, Trump’s trade disputes and the threat of a government shutdown over funding his proposed border wall with Mexico have rattled investors and stock markets have been highly volatile.
In the face of Trump’s criticism, and the latest raise, the Fed has signaled that it may hold off on further increases in the near future. Last month Powell said interest rates were currently “just below” the range Fed officials consider neutral, a setting designed to neither speed nor slow growth. His comments appeared to contradict views he expressed in October when Powell said the Fed was “a long way off” neutral.
Speaking to the Economic Club of New York, Powell said the Fed had “no preset policy path” but that in general the US economy looked robust. “We will be paying very close attention to what incoming economic and financial data are telling us,” he said.
“We know that moving too fast would risk shortening the expansion,” Powell said. “We also know that moving too slowly – keeping interest rates too low for too long – could risk other distortions in the form of higher inflation or destabilizing financial imbalances.”
Powell is set to give his final press conference of the year shortly after the Fed’s statement was released and is expected to be asked about Trump’s criticism of the Fed, an independent body that has traditionally not been subjected to public criticism from a sitting president.
White House press secretary Sarah Sanders defended Trump’s criticism of the Fed on Tuesday. “The president is stating his opinion, which he is perfectly within his right to do,” said Sanders. “He has been very clear about what his opinion is while at the same time he understands that the Fed is an independent agency. That doesn’t take away the president’s right to express his opinion on a particular matter.”White House press secretary Sarah Sanders defended Trump’s criticism of the Fed on Tuesday. “The president is stating his opinion, which he is perfectly within his right to do,” said Sanders. “He has been very clear about what his opinion is while at the same time he understands that the Fed is an independent agency. That doesn’t take away the president’s right to express his opinion on a particular matter.”
Powell defended the Fed’s independence. “Political considerations play no role whatsoever” in the Fed’s decision, Powell said, adding that the independence of the Fed is “essential” if the central bank is to do its job properly. Powell said the Fed based its decisions on the economic data it gathered and “nothing will cause us to deviate from that”.
The Fed is charged with helping to keep unemployment low and controlling inflation. The latest rise comes as the US unemployment rate has dropped to levels unseen since 1969 and inflation has remained low. However, Trump’s trade disputes and the threat of a government shutdown over funding his proposed border wall with Mexico have rattled investors and stock markets have been highly volatile.
Powell said the Fed was watching the recent volatility in the stock markets but downplayed their importance. “We follow markets really carefully but remember, from a macroeconomic standpoint, no one market is the single dominant indicator,” he said.
Federal ReserveFederal Reserve
EconomicsEconomics
Donald TrumpDonald Trump
US economyUS economy
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