US Federal Reserve officials are largely united on the need to raise interest rates further, despite criticism from President Donald Trump of the central bank’s tightening moves, according to minutes released Wednesday of the central bank’s policy meeting last month.
The minutes showed that every policymaker backed the central bank’s September decision to raise the target policy rate to between 2 percent and 2.25 percent, Reuters reports.
Participants in the Fed’s rate-setting committee also “generally anticipated that further gradual increases” in short-term 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 report said.
“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 Fed was quoted as saying.
Trump told Reuters 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.”
Though the Fed minutes released Wednesday did not refer to any of Trump’s criticism, its message of further rate increases suggests that policymakers are not fazed by it, the report noted.
The broadly united front could bolster expectations the central bank will raise rates a fourth time this year in December, but the minutes also show the committee remains split on how much further to raise rates next year.
A few participants suggested rates would need to rise enough to modestly restrain economic growth, even as two others “indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation.”
Fed officials overall expect rates to rise to 3.1 percent next year and 3.4 percent in 2020, just above their 3 percent estimate for the long-run “neutral” rate at which borrowing costs are neither braking nor stimulating economic growth, Reuters said.
Traders of futures contracts tied to the Fed’s policy rate see rates topping out at about 3 percent.
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