In the Federal Reserve’s recently released report of their September policy meeting, it has been revealed that the Central Bank officials were unanimous in their approval of a one-quarter point rate hike — their third such increase this year.
Amid last week’s stock market free fall — which was partly influenced by the rate increase — President Trump expressed deep irritation with the Fed over the rate hike, noting that he felt the Fed was “out of control.”
According to CBS News, Trump went so far as to call the Central Bank “my biggest threat,” criticizing Chairman Jerome Powell. “I’m not happy with what he is doing because he is going too fast,” President Trump stated. Critics of the president have suggested that Trump’s continual attacks on the Fed — which have been ongoing since the summer — threaten the Fed’s need to operate independent of political pressure.
However, there are some members of the Federal Open Market Committee — which is responsible for setting Federal Reserve rates — who believe that it might be necessary to raise rates even more aggressively to prevent the economy from growing too quickly. More conservative members of the committee wanted to see “clear signs” of an overheating economy before taking a more aggressive approach.
Economists expect the Fed to continue to incrementally raise rates, despite pressure from President Trump. Even with the recent increases, the Fed’s short-term rates remain historically low.
“Overall, nothing here to change our view that the Fed will persist with its gradual approach of hiking by 25 each quarter,” said Paul Ashworth, chief U.S. economist with Capital Economics.
Central Bank policy makers upgraded their assessment of the U.S. economy, now predicting a GDP growth of 3.1%. However, the long-term assessment remains more muted, as they expect growth to soon slow to 2% and then drop further after 2021. The Federal Reserve also expects the unemployment rate to drop to its lowest levels since 1969. As growth continues, the Fed plans to slowly increase rates to help stifle inflation.
President Trump has been frustrated by the lack of cohesion between the Central Bank board and his own policy views, considering that he has had the good fortune to nominate or re-nominate members to six of the board’s seven seats. Chairman Powell was also nominated by President Trump, with the president nominating Powell to the seat in February after parting ways with former Chairperson Janet Yellen. President Trump’s criticism of the board was not limited to Powell, as he also noted that “I put a couple of other people there that I’m not so happy with too but for the most part I’m very happy with people.”