The US Federal Reserve raised interest rates again on Wednesday despite intense, and unprecedented, pressure from Donald Trump to leave rates unchanged.
After a two-day meeting the central bank announced rates would rise a quarter of a percentage point, to a range of 2.25% to 2.5%, the ninth such move since late 2015 and further signaling the Fed’s confidence in the US economy.
In a statement the Fed said the labour market had continued to strengthen and that “economic activity has been rising at a strong rate.”
Trump has waged a public campaign to halt further rate rises, a highly unusual move for a president, calling the increases “crazy” and “foolish” and arguing the Fed’s policy was “the “biggest threat” to the US economy, larger than the administration’s trade dispute with
Last month Trump told the Washington Post he was “not even a little bit happy” with his selection of Jerome Powell to chair the Fed. On Tuesday, as the Fed was meeting, Trump pressed the Fed to hold off from “making another mistake”.
He pointed to a Wall Street Journal editorial that called for a pause in rate hikes, arguing that US growth may be slowing, Trump’s tariff disputes have dampened trade and sales of homes and cars, both highly impacted by rate rises, have dipped.
I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!— Donald J. Trump (@realDonaldTrump)
In spite of Trump’s criticism the Fed voted again for another small increase in rates. All four of the Fed’s rate increases this year have been approved on a unanimous vote.
The Fed is charged with helping to keep unemployment low and controlling inflation. The latest rise comes as the US unemployment rate has dropped to levels unseen since 1969 and inflation has remained low. However, Trump’s trade disputes and the threat of a government shutdown over funding his proposed border wall with
In the face of Trump’s criticism, and the latest raise, the Fed has signaled that it may hold off on further increases in the near future. Last month Powell said interest rates were currently “just below” the range Fed officials consider neutral, a setting designed to neither speed nor slow growth. His comments appeared to contradict views he expressed in October when Powell said the Fed was “a long way off” neutral.
Speaking to the Economic Club of New York, Powell said the Fed had “no preset policy path” but that in general the US economy looked robust. “We will be paying very close attention to what incoming economic and financial data are telling us,” he said.
“We know that moving too fast would risk shortening the expansion,” Powell said. “We also know that moving too slowly – keeping interest rates too low for too long – could risk other distortions in the form of higher inflation or destabilizing financial imbalances.”
Powell is set to give his final press conference of the year shortly after the Fed’s statement was released and is expected to be asked about Trump’s criticism of the Fed, an independent body that has traditionally not been subjected to public criticism from a sitting president.
White House press secretary Sarah Sanders defended Trump’s criticism of the Fed on Tuesday. “The president is stating his opinion, which he is perfectly within his right to do,” said Sanders. “He has been very clear about what his opinion is while at the same time he understands that the Fed is an independent agency. That doesn’t take away the president’s right to express his opinion on a particular matter.”