US Fed's vice chair backs further rate hikes

US Fed's vice chair backs further rate hikes

President Trump went after Federal Reserve Chairman Jerome Powell on Tuesday, blaming him for threatening US economic growth.

The US economy is in good shape to keep expanding, but more interest rate increases will be needed to maintain that trajectory without inflation, newly-installed Federal Reserve Vice Chairman Richard Clarida said on Thursday (Oct 25).

While the Fed continues to signal higher interest rates, President Trump remains critical.

Asked if he regrets nominating Powell to his Fed chairmanship, Trump told the WSJ: "Too early to tell, but maybe".

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After years in which the central bank held rates very low to boost economic growth and hiring, the Fed's current policy stance was providing support to an economy that no longer needed it, Mr. Clarida said in a speech at the Peterson Institute for International Economics. Raising rates now will also give the Fed room to act if growth does hit a wall in a year or two. Mr Trump has previously called Fed policies "crazy".

New Federal Reserve vice chair Richard Clarida on Thursday said he'd support "some further" increase in interest rates as the best way to nurse the current USA recovery along while guarding against any jump in inflation. A Reuters report yesterday said the savvy Fed chair had at least 33 meetings with members of Congress in June, July and August, according to Fed calendars, and had three times as many congressional meetings in his first seven months in office as did his predecessor, Janet Yellen.

"He was supposed to be a low-interest-rate guy". In an interview with Fox Business News last week, the president said, "I put him there and maybe it's right, maybe it's wrong but I put him there". Though critics have blamed Trump's comments for the sharp fall in U.S. stock markets, White House officials have dismissed them as a natural correction after long run of rising share prices. It was the third increase this year and the eighth since December 2015, when the Fed started inching rates up from effectively zero percent. "I don't like all of this work that we're putting into the economy and then I see rates going up".

Economists have generally given Powell high marks on his performance, arguing the Fed is acting wisely by gradually returning monetary policy to normal levels after the worst recession in 75 years. "Trend growth in the economy may well be faster and the structural rate of unemployment lower than I would have thought several years ago". He can't remove Fed governors, including Powell, except for ill-defined "cause", and the Senate must confirm replacements. "And because there's a lot of uncertainty about what neutral is, if you read between the lines, it's conceivable that you could make the case that as they approach neutrality they could go a little slower".

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