Published: Fri, October 19, 2018
Economy | By

Despite Trump criticism, Fed policymakers see need for more rate hikes

Despite Trump criticism, Fed policymakers see need for more rate hikes

"These pose major challenges to achieving fairer and more balanced trade and we will continue to monitor and review China's currency practices, including through discussions with the People's Bank of China", he added.

But Bullard has taken a different tack, arguing that the Fed rate hikes of the past roughly two years have only been possible because the economy outperformed the central bank's outlook.

The Federal Reserve's current monetary policy path would raise the risks of recession in an economy where recent, unexpectedly strong growth may start to taper anyway, St. Louis Fed President James Bullard said on Thursday.

On the other hand, while risks were 'roughly balanced, ' some Fed members said instability in emerging economies - many of which are heavily indebted and vulnerable when USA rates rise - could 'spread more broadly through the global economy and financial markets'.

President Donald Trump has previously accused China of keeping its currency weak to make exports more competitive.

Still, policymakers noted that the relative weakness of the worldwide economy could create "potential for further strengthening of the US dollar", a factor that could weigh on USA exports.

As well as making life more hard for United States exporters, a stronger greenback also raises the borrowing costs of many heavily-indebted emerging market economies, such as those in Latin America which have high levels of dollar-denominated borrowing. Despite his criticism of the Fed's policymaking, Trump's picks have been seen as representing the mainstream of economic thinking about how a central bank should manage interest rates.

Many economists view current growth of around 3 per cent and unemployment of 3.7 per cent, which is near a 50-year low, as unsustainable and likely to lead to higher inflation.

'A few participants expected that policy would need to become modestly restrictive for a time, ' according to the minutes.

Furthermore, "some" at the meeting said risks grew as the U.S. economy increasingly outpaced its rivals" more sluggish growth "because of the potential for further strengthening of the dollar'.

The Trump administration has already imposed tariffs on $250 billion worth of Chinese goods, which have been met with countermeasures out of Beijing.

Fed members said Trump's trade wars both created uncertainty and could boost inflation.

Wall Street, which had struggled through much of the day, closed slightly lower, with stocks paring losses after the minutes' release.

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