Dollar Rises As Fed Minutes Signal More Tightening Ahead

Jeannie Matthews
October 20, 2018

However, despite that another four or five hikes can be expected to provide support to the greenback over the coming year, the Dollar is unlikely to get any thanks from the market when rates draw near to the FOMC's projected levels.

President Donald Trump's repeated complaints about rising interest rates appear to be having no impact on policy so far.

United States central bankers see no reason to pause their current course of gradual interest rate hikes amid the American economy's brisk expansion, according to meeting minutes released on Wednesday (Oct 17). "Because the Fed is raising rates too fast". Recession risks are low, he said, adding "all the indicators now are for a strong economy for a significant period into the future".

Last week, Trump the Fed for the massive stock sell-off that caused the Dow to plummet 832 points in a single day - its largest single-day point drop since February and its fourth-worst point loss in history.

Some members of the rate-setting panel - the Federal Open Market Committee - also indicated it might be necessary to raise rates more aggressively to keep the economy from overheating.

The Federal Reserve's most recent interest rate increase put monetary policy about where it should be, with no further hikes required in an economy where inflation remains weak, St. Louis Fed President James Bullard said on Thursday, pressing an argument he has made over the past two years.

Last month, central bankers unanimously agreed to raise rates by yet another quarter percentage point, to a range of 2% and 2.5% citing a strengthening economy and low unemployment. The minutes noted that the tax cuts Trump had pushed through Congress late last year, along with the spending increases Congress approved at the start of this year, were helping boost economic activity.

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

When asked if he thought the President should be weighing in on the agencies, he replied: "I don't think he should be making comments on any federal agency".

"I really disagree with what the Fed is doing", Trump told reporters October 10 in Pennsylvania.

Powell's predecessor, Janet Yellen, defended his performance in remarks Monday at a mortgage bankers conference in Washington.

The former Fed chair's comments add to a chorus of voices who say it's unusual and even perhaps risky for a president to openly criticize central bank policy, which is charged by Congress with focusing on delivering maximum sustainable employment and stable prices.

"The fed raising interest rates too quickly, she's too independent", - he said and noted that he does not like what makes the Chairman of the regulator Powell, but to intervene in the policy of the fed, the President can not.

"There was a pretty well-formed expectation that it would more likely showcase a Fed that's more confident and assertive debating tighter policy", said Richard Franulovich, head of FX strategy at Westpac Banking Corp in NY.

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