Fed says rate hikes ‘right course’ for US mone­tary pol­icy

Oman Daily Observer - - OMANINTERNATIONAL -

NUSA DUA, In­done­sia: The US Fed­eral Re­serve does con­sider the im­pact of in­ter­est rate hikes on emerg­ing mar­kets when set­ting pol­icy, but the in­creases are the “right course of do­mes­tic pol­icy” for the world’s largest econ­omy, said a top Fed of­fi­cial on Satur­day.

The com­ments by Fed Vice Chair Ran­dal Quar­les came as some emerg­ing mar­kets face in­creas­ing pres­sure this year as higher US in­ter­est rates draw for­eign cap­i­tal away, and due to fears of fall­out from a tar­iff war be­tween the US and China.

The Fed has also been at the re­ceiv­ing end of crit­i­cism from Pres­i­dent Don­ald Trump, who on Thurs­day called its in­ter­est rate in­creases a “ridicu­lous” pol­icy. Those sur­pris­ingly caus­tic re­marks came a day af­ter the pres­i­dent told re­porters, in re­sponse to a Wall Street rout, that the “Fed has gone crazy.”

“If you look around the world, I think the Asian re­gion as a whole is rea­son­ably strong rel­a­tive to cer­tain ar­eas in the past,” Quar­les said, re­spond­ing to a ques­tion on the re­gion’s ca­pac­ity to with­stand in­ter­est rate shocks.

“We do con­sider” the im­pli­ca­tion of US mone­tary pol­icy on emerg­ing mar­kets and the rest of the world, he said at the an­nual meet­ing of the In­sti­tute of In­ter­na­tional Fi­nance on the In­done­sian re­sort is­land of Bali.

Ris­ing US rates, cou­pled with fears over the im­pact of Us-sino trade war, have hurt emerg­ing Asia, and cur­rency, bond and share mar­kets in In­dia, In­done­sia and the Philip­pines and else­where in the re­gion have all come un­der pres­sure.

The Fed last month raised in­ter­est rates for the third time this year, and fore­sees an­other hike in De­cem­ber, three more next year, and one in­crease in 2020.

“It’s not go­ing to be in the in­ter­est of any­one in the world... for us to get be­hind the curve in the US by mod­er­at­ing what we think is the right course of do­mes­tic pol­icy,” Quar­les said.

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