Hedging against Trump? Fed chair builds network of support on Capitol Hill

Hedging against Trump? Fed chair builds network of support on Capitol Hill

"Every time we do something great, he raises the interest rates", Mr. Trump said.

In his first public appearance since taking the post, Clarida said that even after three rate hikes this year, the Fed's benchmark lending rate continues to provide stimulus to the economy that will need to be scaled back. He also labelled the Fed's rate hiking policy the greatest threat to the economy, which has been boosted this year by one of the largest tax cuts in USA history. "They have a right to act the way they do", Hatch said.

Framing the state of the economy in personal terms, referring to "my numbers", President Trump blasted Fed chief Jerome Powell and the central bank itself in an interview with the Wall Street Journal.

Trump sidestepped a question on what circumstances would lead him to remove Powell.

"I believe monetary policy today remains accommodative, and that, with the economy now operating at or close to mandate-consistent levels for inflation and unemployment, the risks that monetary policy must balance are now more symmetric and less skewed to the downside", he said.

Asked on Wednesday about the president's broadside against the central bank, Republican Sen.

"The funds rate is just now - for the first time in a decade - above the Fed's inflation objective" of two per cent, he said in his prepared speech.

But the president has lately expressed frustration with the Fed's gradual interest rate increases, created to slow down the economy and prevent inflation from taking off - standard macroeconomic steps that Trump insists are undercutting his expansionary fiscal moves.

This outlook is in line with comments by Powell and the policy setting committee. If doubts were to emerge in markets about the central bank's credibility, then investors could push up borrowing costs, ultimately slowing the economy and hurting stocks, thus meaning Trump's lobbying had backfired.

Trump is also not happy with some of the members of the Fed he has already appointed.

In an interview earlier this month, Trump told FOX Business' Trish Regan that he saw the Fed as the biggest threat to his presidency. It was the third increase this year and the eighth since December 2015, when the Fed started inching rates up from effectively zero percent.

The comments were in response to questions from economist Adam Posen, a former policymaker at the Bank of England, who said Trump's criticisms are "pretty unprecedented for the last couple of decades from a U.S. president".

The fed funds rate target is now 1.75 percent to 2 percent, and that is the rate closely tied to consumer debt, particularly credit cards, home equity lines and other adjustable-rate loans.

Information for this article was contributed by Erik Wasson of Bloomberg News.

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