Fed Reserve defends pace of interest rate rise amid Trump’s attacks

The dollar weakened as Mr Powell, speaking at a meeting of global central bankers in Jackson Hole, Wyoming, said a gradual approach of raising rates remains appropriate to protect the USA economy and keep job growth as strong as possible with inflation under control.

Powell reiterated on Friday that the central bank will stick to the strategy of gradual rate hikes to manage potential risks and support domestic economic recovery. The president has complained that the Fed's tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late past year, a pullback of regulations and a rewriting of trade deals to better serve the United States.

Just this week, a paper by Fed economists warned that even though there is uncertainty about estimates of the natural rate of unemployment, it's still better to set rates based on those than just wait for inflation.

With the economy growing at a 4.1 percent annual rate in the second quarter of the year and inflation rising, Fed officials have forecast that they will continue to slowly raise a key short-term interest rate.

The Federal Reserve should stop raising interest rates now because the economy is showing no signs of inflation surging and is expected to slow next year after the effects of fiscal stimulus wear off, St. Louis Fed President James Bullard said Friday.

The Fed has raised interest rates seven times since the end of 2015, including twice in 2018, taking the Fed Funds rate range to between 1.75% and 2%. Instead, Powell defended the Fed's policy on the grounds that it would not undermine continued growth.

Unemployment rate fell to 3.8 percent - a level that was last seen in April 2000 and in the year of 1969. But Steve Moore, a former adviser to the Trump campaign, said the central bank kept the policy too harsh and that "it's hard to see where the inflation is that worries the Federal Reserve so much". The chairman reminded his audience of central bankers and economists that if the Fed stubbornly tried to defend a previous estimate for full employment - a term economists refer to as U-star - the cost would be 1.6 million jobs.

Trump says Turkey has acted badly in Brunson case
Turkey says Brunson has ties to political groups responsible for the 2016 attempted coup of President Recep Tayyip Erdogan. US stocks suffered their worst day in seven weeks after the move, and the lira gained 7 percent against the dollar.


Pearce said he saw Powell's comments as signaling that the central bank will continue raising rates gradually over the next year.

"I'm not thrilled with his raising of interest rates, no". I'm not excited, "said Trump".

The US Dollar (via the DXY Index) is closing in on its lows of the week established on Wednesday as traders are heading into the weekend disappointed by what they've heard so far at the Jackson Hole Economic Policy Symposium.

While Trump has been critical of the Fed, many on Wall Street and in the wider business community are supportive of his leadership of the central bank and his decisions on interest rates.

Powell said that if the economic outlook markedly changed, the Fed would be prepared to change course.

Wrapping up the Fed's annual retreat in Jackson Hole, Wyoming, the president's handpicked choice to succeed Janet Yellen brushed off Trump's concerns that continued increases in interest rates could derail the U.S. economy.

Inflation, meanwhile, is near the Fed's 2 percent target range.

  • Darren Santiago