Economy

Fed plans to keep hiking interest rates despite Trump blowback

Fed plans to keep hiking interest rates despite Trump blowback”

The Fed has raised interest rates three times this year as it seeks to prevent a vibrant economy from overheating.

Fed Chairman Jerome Powell has said the central bank will monitor interest rates to avoid raising them too quickly, which could hamper USA growth.

As well as making life more hard for USA exporters, a stronger greenback also raises the borrowing costs of many heavily-indebted emerging market economies, such as those in Latin America which have high levels of dollar-denominated borrowing.

USA stock markets, which had largely expected a "steady as you go" statement, moved slightly higher but remained loss-making after the update, which stressed a continuation of the Fed's "gradual" approach to rate rise policy.

Policy makers at the Federal Reserve remain focused on gradually raising interest rates in response to strength in the US economy and low unemployment, according to minutes of their September meeting released Wednesday.

Key U.S. economic data to watch today includes the Philadelphia Fed Manufacturing Index, the Conference Board's Leading Index and Weekly Unemployment Claims.

At 0640 GMT the rand was 0.26% weaker at R14.2900 per dollar, having risen to R14.1050, its best since 1 October, as the NY session kicked off before the release of the Fed minutes breathed life back into the greenback rally.

This would move United States interest rates slightly above what policymakers say is "neutral" - that is, neither slowing nor speeding the economy - but some participants said the Fed may need to go even further than that.

According to the minutes: "A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level".

"My biggest threat is the Fed, because the Fed is raising rates too fast", he told Fox Business television.

Markets fear currency crises in Turkey, Argentina and other emerging market economies could spread beyond their borders - something that could be sparked as investors pull out to take advantage of higher rates in the US. The move was immediately criticized by President Donald Trump, who said he was not happy with the continued rate hikes.

Some investors say that, after years of easy money, pockets of risk have built up throughout the global economy - raising the chances that a bubble could burst or banks could see significant defaults on debt as borrowing costs begin to increase. "I'm anxious about the fact that they seem to like raising interest rates".



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