US Fed's vice chair backs further rate hikes

Posted October 27, 2018

Donald Trump has decided that the biggest threats to America's economy are the US Federal Reserve and its chairman Jerome Powell, who "almost looks like he's happy raising interest rates".

The US economy is in good shape to keep expanding, but more interest rate increases will be needed to maintain that trajectory without inflation, newly-installed Federal Reserve Vice Chairman Richard Clarida said on Thursday (Oct 25).

Trump also said that Powell nearly tends to be happy with the raising interest rates.

Meanwhile, Powell and his colleagues have continued to raise interest rates, and rarely does a week goes by without several Fed policymakers giving public remarks about why rate hikes are necessary in the face of an economy with unemployment at a 49-year low and inflation near the Fed's 2-percent goal.

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Mr Trump said the Fed poses the biggest risk to the United States economy, adding that higher interest rates would slow growth and add to the national debt. Before becoming the president he had complained that the bank is moving very slowly in increasing the interest rates.

"As everyone is obsessing whether they hike in December or not, I'll say this". Boockvar said Powell's comments give the impression that the Fed does not appear to have a sense of urgency because he noted that there's no clear sign of inflation accelerating above the Fed's target of 2 percent.

Powell has so far brushed off the attacks, noting the Fed is independent and arguing by raising rates gradually it's just seeking to normalize monetary policy in an "extraordinary" economy.

In an interview with the Wall Street Journal, Trump hinted that he regretted nominating Powell in the first place.

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The Dollar advanced Wednesday after shrugging off President Donald Trump's latest attack on the Federal Reserve (Fed), which saw him describe the central bank as the greatest risk facing the US economy at the moment.

He described his push for growth as a competition with Obama's record, saying that increases under his Democratic predecessor were skewed because of low-interest rates. "I'm not going to get into that issue", said Crapo, chairman of the Senate Banking Committee. If doubts were to emerge in markets about the central bank's credibility, then investors could push up borrowing costs, ultimately slowing the economy and hurting stocks, thus meaning Trump's lobbying had backfired. I think they all are, to be honest with you.

It is unclear whether the president would have the authority to remove Powell.

George Washington University political scientist Sarah Binder, who published a book on the Fed's relations with elected officials, said that while Trump's tweets and media outbursts gain much attention, they fall short of the in-person demands presidents in the 1960s and 1970s made of Fed chiefs.

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- Trump hits out at Fed policy for a second time in October.