US Federal Reserve raises interest rates and says more is coming, while brushing off Donald Trump’s criticism
The move reflected an upbeat assessment of the economy that was identical to the central bank’s last policy statement eight weeks ago, despite concerns over Trump’s escalating trade war
US Federal Reserve officials raised interest rates for a third time this year and reaffirmed their outlook for further gradual hikes well into 2019, risking fresh criticism from US President Donald Trump.
The move reflected an upbeat assessment of the economy that was identical to the central bank’s last policy statement eight weeks ago, despite concerns over Trump’s escalating trade war.
The quarter-point increase boosted the benchmark federal funds rate to a target range of 2 per cent to 2.25 per cent.
Growth and job gains have been “strong” and inflation remains near the central bank’s 2 per cent target, the Federal Open Market Committee said in its statement Wednesday following a two-day meeting in Washington.
Fed Chairman Jerome Powell and his colleagues are trying to pull off a feat the central bank has accomplished only once in its 104-year history: engineer a soft landing of the economy as growth slows by raising rates just enough to prevent overheating, but not so much that they trigger a recession.
Trump is not making the Fed’s tricky task any easier.
On August 20, in a rare criticism of the Federal Reserve by a sitting president, Trump told Reuters: “I'm not thrilled with his raising of interest rates, no. I'm not thrilled … I should be given some help by the Fed.”
As well as that criticism, Trump has complicated matters for the Fed by launching a trade war with China that threatens both to slow growth and boost inflation. Tariffs on an additional US$200 billion of imported goods from China took effect Monday, along with retaliatory levies from Beijing.
Fed officials remained sceptical that Trump’s tax cuts will result in a persistent boost to economic growth.
Watch: Chinese hope for swift end to US-China trade war
While they raised projections for expansion this year and next, they predicted that growth would slow to 1.8 per cent by 2021.
That is in line with their estimate for the economy’s long-run potential and contrasts with the Trump administration’s goal of sustained 3 per cent growth.
In their post-meeting statement and updated economic projections, Fed policymakers made no mention of trade worries and showed no sign they would soon halt the upwards march of rates.
“The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labour market conditions and inflation near the committee’s symmetric 2 per cent objective,” the statement said, repeating previous language.