Trump widens Fed critique, calls it 'my biggest threat'

Ann Santiago
October 20, 2018

Oanda analyst Craig Erlam said the Fed minutes re-affirmed the widely held opinion at the United States central bank that interest rates have further to rise, including another hike this year.

"A few" expected monetary policy would need to be "modestly restrictive", suggesting a Fed funds rate above the longer-run level, St. George Economics reported in today's Morning Report.

The U.S. Federal Reserve should continue with its gradual rate increases but must be prepared to slow the tightening if U.S. productivity breaks out of a several-year lull, as it may be poised to do, an influential Fed governor said on Thursday.

In Tuesday's interview, though, Trump said of his other nominees for the Fed, "I put a couple of other people there I'm not so happy with too but for the most part I'm very happy with people".

At 0640 GMT the rand was 0.26% weaker at R14.2900 per dollar, having risen to R14.1050, its best since 1 October, as the NY session kicked off before the release of the Fed minutes breathed life back into the greenback rally.

The US 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.

Many on Wall Street and in government have decried the president's attacks on the Fed, pointing to the long-term danger of undermining the US central bank.

That's according to the minutes of the latest Fed meeting, in which every policymaker backed a move to raise interest rates in September. Recession risks are low, he said, adding "all the indicators now are for a strong economy for a significant period into the future".

Furthermore, "some" at the meeting said that risks grew as the USA economy increasingly outpaces its rivals' more sluggish growth "because of the potential for further strengthening of the dollar".

Still, he added, "I also think that we should pay attention to other indicators of tightness and overheating in addition to inflation".

China's yuan halted its recent sharp slide on Friday after statements from senior regulators pledging support for private firms facing liquidity problems and because official data showed the central bank undertook smoothing operations to support the currency. They signaled they see at least three more rate hikes as necessary in 2019.

In remarks Thursday to the Economic Club of NY, he suggested that a tick up in the economy's potential growth rate, if realized, could warrant a slower pace of rate hikes than would otherwise be appropriate. He is on record urging the central bank to focus on "what's good for the country" instead of raising rates, which can hurt consumers because it increases the costs of borrowing. "They're so tight. I think the Fed has gone insane", Trump said at the rally.

Cohn added he "believe (s) very much in the setup of the US government" and the independence of its agencies.

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