Published: Sat, October 20, 2018
Worldwide | By Lisa Hogan

Further US rate hikes 'most likely' needed, Fed minutes show

Further US rate hikes 'most likely' needed, Fed minutes show

Yellen spoke at a banking forum just days after the president repeatedly complained that the Fed was hurting financial markets and threatening economic growth by raising interest rates too quickly.

While a standard Taylor Rule would recommend much higher interest rates than the Fed now envisions - a fact often used to criticize the relevance of policy rules in general - Bullard said that adjusting the rule for changes in the economy shows that current policy is on target. Rising interest rates should have been garnered much sooner and faster to forestall the large bubble from expanding. And he's argued that the central bank needs to keep its eye on possible financial froth - the trigger for the last two recessions - as well as inflation for signs of overheating.

"The Federal Reserve is getting a little too cute", Trump said in a phone call with Fox & Friends last week, reminding the anchors that even if things might temporarily look grim, the country was doing better by all objective measures than under Barack Obama.

"I think the Fed has gone insane", he said.

Gold prices held steady on Wednesday despite a rise in equities, with investors waiting for minutes from the U.S. Federal Reserve's latest policy meeting for any fresh clues on the pace of interest rate hikes.

Complicating matters slightly, though, is the fact that Fed governors don't have sole deciding power when it comes to interest rates. "I put (Powell) there". Since mid-June, the renminbi has fallen more than 7 percent against the US dollar. But they did show that all Fed officials favored gradual rate increases. "I'm not blaming anybody", Trump said in the interview.

Alan Greenspan, a legendary Fed Chairman who served under four different presidents from 1987 to 2006 said that it was all too common during his years as well to receive recommendations or insight from the president.

"Despite a new openness to the idea of asset-market excesses in some parts of the economics profession, the profession is nowhere close to agreeing on a new dogma", he co-wrote with economist Bob Barbera.

In recent years, however, the yuan or renminbi (RMB) has strengthened and economists now say it is more in line with China's economic fundamentals. But as a sitting member of the Fed Board, Quarles is also a voting member of the Federal Open Market Committee. Earlier in the day, St. Louis Fed President James Bullard said the current federal funds rate target of between 2% and 2.25% is "about where it should be".

The result though is that inflation may no longer be the best indicator of whether the economy is overheating, Powell said in an August 24 speech.

The minutes did note concerns about the impact of Trump's get-tough trade policies, citing business contacts who expressed worries about lost markets and rising prices for steel and aluminum. A series of natural disasters took a toll, but the lag in exports also reflects uncertainties over trade tensions after President Donald Trump imposed penalty tariffs on billions of dollars' worth of Chinese exports.

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