Hedging against Trump? Fed chair builds network of support on Capitol Hill

Image doomu  iStock

Image doomu iStock

Fed policymakers acknowledge that increasing interest rates even just a few more times will likely slow the economy and increase unemployment, but that, they say, is a reasonable price to pay for keeping inflation contained.

After years in which the central bank held rates very low to boost economic growth and hiring, the Fed's current policy stance was providing support to an economy that no longer needed it, Mr. Clarida said in a speech at the Peterson Institute for International Economics. He also labelled the Fed's rate hiking policy the greatest threat to the economy, which has been boosted this year by one of the largest tax cuts in US history. "They're going to keep keep raising rates", said John Briggs, head of strategy at NatWest Markets.

President Donald Trump announces Jerome Powell as the new chairman of the U.S. Federal Reserve in the Rose Garden of the White House in Washington on November 2, 2017.

"I really think it is not a desirable thing for a president to comment so explicitly on Fed policy", she said.

This isn't the first time the president has publicly disagreed with the policy makers over at the central bank. He "almost looks like he's happy raising interest rates", the president added.

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.

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The calendar does not say what was discussed, nor who initiated the meetings, and a Fed spokesman declined to comment. The act provides that a governor of the central bank can be returned if there is "a cause". Mr Trump has previously called Fed policies "crazy". He joined Trump's other two picks, Powell and Randal Quarles, who now sit on the board with Lael Brainard, an appointee of former President Barack Obama. Powell's actions at the USA central bank threaten economic growth, the president says in the interview. It was the third increase this year and the eighth since December 2015, when the Fed started inching rates up from effectively zero percent.

The fed funds rate target is now 1.75 percent to 2 percent, and that is the rate closely tied to consumer debt, particularly credit cards, home equity lines and other adjustable-rate loans.

Trump's criticisms mark a departure from the practices of his recent predecessors.

At the Rose Garden ceremony marking his nomination by Trump to the chairmanship, Powell was careful to slip into his remarks a reference to the Fed's independence: "I strongly share that sense of mission and am committed to making decisions with objectivity and based on the best available evidence, in the longstanding tradition of monetary policy independence".

Information for this article was contributed by Erik Wasson of Bloomberg News.

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