Published: Thu, September 27, 2018
Markets | By Otis Pena

US Federal Reserve raises interest rates amid strong growth

Wall Street stocks finished lower on Wednesday (Sep 26) after the Federal Reserve lifted interest rates again and signalled it expects to continue raising rates gradually amid solid U.S. growth. The Fed has also indicated it wants three more rate hikes in 2019. Mr. Powell took pains to explain that during his postmeeting news conference, pointing out that every policy maker said that they expect interest rates over the long run to be above current levels-an indication that, policy makers think the current level of rates really is accommodative.

Some incoming Fed members have signaled they may soon favor raising the key lending rate high enough to start to restrict the economy, pushing it above the estimated "neutral" rate.

For instance, the move to reinstate the "countercyclical factor" in the calculations of the midpoint in the yuan's daily trading range, gave the central bank greater control over its value and so can prevent it from weakening greater than desired due to higher United States interest rates. Mr Trump told CNBC in July he was "not happy about" the Fed raising borrowing costs.

U.S. FEDERAL RESERVE. Chairman Jerome Powell speaks during a news conference in Washington, DC, on March 21, 2018. Asked about the pressure from Trump to keep rates low, Powell said the Fed is focused on its mission to keep the economy healthy and doesn't consider politics in the process.

Survey respondents predicted that the Fed would raise interest rates by two more quarter points in 2019, according to CNBC.

Trump touts his own achievements, and the United Nations laughs
Trump's trade wars against allies and disdain for multilateral agreements have isolated the United States on the world stage. Appearing briefly flustered, Trump smiled and joked that it was not the reaction he expected "but that's all right".

In its updated economic outlook, the Fed foresees one final rate hike after 2019 - in 2020 - which would leave its benchmark at 3.4 per cent. Unemployment is low, economic growth is strong, and inflation is relatively stable. If the Fed finds that prospect likely, it might signal Wednesday that it expects to slow its rate increases next year. "Are they seeing more fiscal policy showing through to aggregate demand than they thought?" said William English, a professor at Yale and former director of the Fed's Division of Monetary Affairs.

But analysts say the central bank is tangling with a complex set of near-term questions - a China trade battle affecting hundreds of billions of dollars in goods that is likely to be inflationary; tax cuts and fiscal stimulus late in the economic recovery; and dizzyingly high asset prices alongside more or less stagnant wage growth despite historically low unemployment. The benefits of this strong economy have not reached all Americans.

"We are doing great as a country", Trump said Wednesday at a press conference in NY. We can do other things with the money. The Fed will do it as long as the growth impact is rather muted while the inflationary effects become more apparent in the U.S. economy. Aside from criticizing recent Fed rate hikes, he's launched a trade war with China that threatens both to slow growth and boost inflation.

The UAE's banking regulator pushed the interest rate higher by 25 bps on its certificate of deposits, that are used as a monetary policy instrument through which changes in interest rates are transmitted to the financial institutions, the central bank said on Wednesday. There's ongoing debate about whether 3 percent (or another number) is the "neutral" or "normal" level of interest rates, meaning that's the rate that doesn't boost or curtail the economy.

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