Federal Reserve chair Powell defends interest rate increases following Trump’s criticism
Federal Reserve chair Jerome Powell defended the policy of increasing interest rates to protect the economy today, following President Donald Trump’s attacks on rate increases.
Powell said he believes the policy of gradual interest rate increases “remains appropriate” for the US economy.
“The economy is strong. Inflation is near our two per cent objective, and most people who want a job are finding one… If the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate.”
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Speaking at the Fed’s annual meeting at Jackson Hole he said the Fed has been “navigating between the shoals of overheating and premature tightening with only a hazy view of what seem to be shifting navigational guides”.
His comments come just days after Trump said he was “not thrilled” with the Fed boosting interest rates as he tried to stimulate economic growth and take on China in a trade war.
The Fed is expected to raise rates in September, perhaps again in December, and continue what it refers to as “normalisation” into 2019.
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The dollar fell following Powell’s comments and at the time of writing was down 0.43 per cent.
Market analyst at CMC Markets UK David Madden said: "Traders were expecting a slightly more hawkish announcement, and the neutral tone pushed the US dollar lower."
Neil Birrell, chief investment officer at Premier Asset Management said: “What is clear is that the Fed views the economy as being in a robust state of health and policy will reflect that; rates are likely to rise in September. There isn’t really much new here, but this should provide support for the dollar and help equities even though the bull run is an extended one.”