Fed united on need for more rate hikes

FEDERAL Reserve policy-makers are largely united on the need to raise borrowing costs further, minutes from their most recent policy meeting show, despite US President Donald Trump’s view that interest rate hikes have already gone too far.

Every Fed policy-maker backed the central bank’s September decision to raise the target policy rate to between 2 percent and 2.25 percent, according to minutes of the September 25-26 meeting, published Wednesday.

Participants in the Fed’s rate-setting committee also “generally anticipated that further gradual increases” in shortterm borrowing costs “would most likely be consistent” with the kind of continued economic expansion, labor market strength, and firm inflation that most of them are anticipating, the minutes showed.

“This gradual approach would balance the risk of tightening monetary policy too quickly, which could lead to an abrupt slowing in the economy and inflation moving below the Committee’s objective, against the risk of moving too slowly, which could engender inflation persistently above the objective and possibly contribute to a buildup of financial imbalances,” the minutes said.

Trump said in August he was “not thrilled” with Fed Chair Jerome Powell for raising interest rates, and has since escalated his criticism, this week saying the central bank is his “biggest threat,” and last week calling the Fed “crazy,” “loco,” “ridiculous,” and “too cute.”

Although the minutes did not refer to any of Trump’s criticism, its message of further rate increases suggests that policy-makers are not fazed by it.

“For now, the Fed has made it clear that they are focused on their agenda despite rising presidential pressure on their rate decisions,” said Mike Loewengart, vice president of investment strategy at E*Trade.