Fed Vice Chair Quarles prefers 'more gradual' rate hikes

Steven Mnuchin

Steven Mnuchin

While a standard Taylor Rule would recommend much higher interest rates than the Fed now envisions - a fact often used to criticize the relevance of policy rules in general - Bullard said that adjusting the rule for changes in the economy shows that current policy is on target. Members argued in favor of pressing ahead with one more rate hike in December, bringing the total this year to four.

Even the possibility of a headwind to economic growth, however, has provoked Trump into a series of attacks on the Fed and Powell. "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. "Because, you looked at the last inflation numbers, they're very low".

"You can believe that the Fed is raising rates too quickly, as I do, and also believe that weighing in the way Trump has is very, very bad", liberal economist and Nobel Prize victor Paul Krugman said on Twitter on October 12.

Fed policymakers are largely united on the need to raise borrowing costs further, minutes from their most recent policy meeting show, despite US President Donald Trump's view that interest rate hikes have already gone too far.

But former Fed vice chairman Stanley Fischer told CNBC Thursday that the central bank might be tempted to raise rates more aggressively to show that it is politically independent.

All of this matters for the Pound-to-Dollar rate because by the time January 2020 comes around, when an end of the Fed cycle is looming, the Bank of England is likely to have enough clarity on what the Brexit process means for growth to justify lifting its own interest rate a bit faster.

Beijing's lack of transparency and the recent weakness of the yuan continued to pose major challenges to achieving "more balanced trade", Treasury Secretary Steven Mnuchin said in a twice-yearly report on the foreign exchange policies of major U.S. trading partners. "But I put him there". "I'm not blaming anybody", Trump said in the interview. This was less than a year after the Fed ended the QE program.

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"If there are emergencies that affect the exchange rate, the Treasury has this bank account to the New York Fed that they're allowed to use to send trade orders through the Fed", Richardson explained.

"The relationship between inflation and the tightness of the economy has gotten weaker", said Quarles, "a problem does arise if the Fed remains reliant on inflation as our only gauge of the economy's position relative to its potential".

Also weighing on market sentiment, U.S. Treasury Secretary Steven Mnuchin said he would not attend next week's investment conference in Saudi Arabia.

In September, the Fed raised the federal funds rate by 25 basis points to its current level of 2.25, citing continued strength in the economy.

Trump's concern is that a steady march of rate hikes will serve to the slow economy down just as the administration is nearing its goal of 3% economic growth this year.

"Contacts also suggested that firms were attempting to diversify the set of countries with which they trade - both imports and exports - as a result of uncertainty over tariff policy", the minutes said.

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