Published: Sat, October 20, 2018
Markets | By Erika Turner

Key Fed official backs further gradual rate hikes

Key Fed official backs further gradual rate hikes

In 2019, the Fed forecasts three more rate hikes.

Quarles offered an optimistic perspective on economic growth in the USA, saying that "strong growth" could be sustained because of the room to improve productivity.

Gold prices held steady early Thursday, after dipping in the previous session on a firmer dollar after minutes of the Federal Reserve's September meeting reinforced expectations of a tighter United States monetary policy.

The president has criticized the central bank for raising rates despite still-low inflation.

Regardless of actual White House policy, Mr. Trump's public berating of the Fed could perversely be having the opposite effect than the president intends, many economists say. Neutral is the level of interest rates judged to be neither accommodative nor punitive to the economy.

Even with the stock market's recent weakness - which Trump blames on the Fed - the Standard & Poor's 500 Index is little changed since then.

This is because markets tend to "buy the rumour and sell the fact", which means that once an end to the Federal Reserve's rate hiking cycle is just around the corner, traders would be most likely to dump the Dollar anyway.

Federal Reserve Governor Randal Quarles said he favors gradual interest-rate increases and voiced optimism that the USA economy might be able to grow faster without overheating - potentially meriting a slower hiking path ahead.

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They are carefully trying to keep the economy on even keel all while keeping a watchful eye on possible inflation risks that might be brought about after last year's injection of fiscal stimulus through tax cuts and a massive spending bill.

"If you look at what is actually going on in the economy - when you look at the real numbers - we're way exceeding on growth, we're way exceeding on employment, and the Fed is basically on target", Cohn told CNBC's "Halftime Report."

On Tuesday, Trump said in an interview with Fox Business that the Fed is his "biggest threat".

"I think ... the Fed is making a mistake".

The Fed directly controls only short-term interest rates.

Although Trump wasn't mentioned directly during the meeting, the committee still discussed the policies of the incumbent emphasizing the risk they pose to the economic growth. He added that if the economy sees more technological breakthroughs and improved production methods, the Fed could be more confident in a more hawkish monetary policy.

Some are beginning to question president Trump's remarks as an action to influence the behavior of the Federal Reserve.

Randal Quarles, the USA central bank's vice chair of supervision, who rarely discusses monetary policy, said he was optimistic about the economy's prospects, and that calls for continued "stable, gradual, and predictable" policy tightening.

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