Trump calls US Federal Reserve his 'biggest threat'

Treasury Secretary Steve Mnuchin right says the president respects the central bank's independence

FBN's Jennifer Schonberger gives a summary of the Federal Reserve's minutes from its September meeting.

The discussion, revealed in minutes of the September 25-26 meeting released Wednesday, shows that a few participants believed that the Fed's key interest rate would need to "become modestly restrictive for a time" to guard against inflation climbing too high.

But, amid brisk American expansion, some Fed policymakers also warned of looming dangers to the world economy, such as the potential for a strengthening United States dollar and possible contagion from sputtering emerging markets, according to minutes from the Fed's most recent meeting three weeks ago.

Still, the minutes showed that, for the moment at least, American policymakers were largely in agreement about the near future - despite the increasing heat from the president, who fears higher rates will derail his economic agenda.

"This gradual approach would balance the risk of tightening monetary policy too quickly, which could lead to an abrupt slowing in the economy and inflation moving below the Committee's objective, against the risk of moving too slowly, which could engender inflation persistently above the objective and possibly contribute to a buildup of financial imbalances", the minutes said. The dollar also rose.

The US Federal Reserve has signalled there will be another rise in interest rates this year, despite opposition from the White House and growing concerns about the impact on emerging market economies.


Others said that, to avoid creating asset bubbles or having inflation run above the Fed's two-percent target for too long, the central bank would have to raise rates 'above their assessments of its longer-run level'. The move was immediately criticized by President Donald Trump, who said he was not happy with the continued rate hikes.

"I'm not happy with what he's doing because it's going too fast" in raising rates at a time when inflation has remained relatively low.

A few participants expected rates would need to rise enough to modestly restrain economic growth, even as two others "indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation".

While the Fed's policy outlook suggested the USA economy was humming along nicely, the spectre of rising dollar yields, which along with trade tensions were at the centre of last week's global equities rout, dented appetite for risk. At that point, the policy rate would be at 3.4 percent, according to the median of Fed officials' individual forecasts.

The minutes showed that "almost all" policymakers agreed it was time to remove that language.

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