U.S. Federal Reserve official eyes more dovish rate path

Marco Green
October 19, 2018

President Donald Trump has previously accused China of keeping its currency weak to make exports more competitive.

Onshore yuan, traded in China, fell by as much as 0.07 per cent to touch a fresh 21-month low on Friday before rebounding 0.05 per cent Thursday's close to stand at 6.9338 against the dollar. Officials have penciled in one more rate increase this year, and three in 2019.

The Fed has raised interest rates six times during the Trump administration, three of those times under current Fed chief Jerome Powell, who was nominated by Trump.

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

"These pose major challenges to achieving fairer and more balanced trade and we will continue to monitor and review China's currency practices including through ongoing discussions with the People's Bank of China", Mnuchin said in a statement accompanying the report.

In an interview with Fox Business Network Tuesday, Trump continued his on-going criticism of the Fed for its interest rate increases, which he thinks are slowing the economy.

He says: "My biggest threat is the Fed". Auto loan rates are at a nine-year high, and 30-year fixed mortgage rates recently climbed to their highest level in seven years.

Instead, some members of the committee believed that the Fed would need to impose "modestly restrictive" conditions on the economy, the minutes show.

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.

Randal Quarles, who rarely discusses monetary policy, painted a somewhat more optimistic picture than his colleagues on the economy's longer-term capacity and said he favoured a bit more dovish path than most others in the US central banking system. He added that if the economy sees more technological breakthroughs and improved production methods, the Fed could be more confident in a more hawkish monetary policy.

The United States has imposed tariffs on about $250 billion in Chinese goods, and Beijing has responded by targeting about $110 billion in USA products.

US stock prices recovered some earlier losses but were still down for the day following the minutes.

Other reports by Click Lancashire

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