U.S. dollar weakens after Trump slams Fed rate hikes

U.S. dollar weakens after Trump slams Fed rate hikes

U.S. dollar weakens after Trump slams Fed rate hikes

The Fed has raised interest rates seven times since 2015 after slashing them during the 2008 recession as the USA experiences record low unemployment and stable inflation.

In an interview with Reuters published on Monday, the president said he was "not thrilled" with the rate rises under new Fed boss Jerome Powell, repeating comments made last month about the bank's tightening measures.

Past presidents from both parties have sought to insulate the central bank from political pressure, anxious it could taint the Fed's decision-making and erode its credibility with the public.

Sen. Bob Corker (R-Tenn.) said he also met with Powell last week.

The central bank is expected to raise rates at least two more times this year, citing a solid economy with fewer Americans out of work.

Beyond the merits of the Fed's decision, though, the main problem with Trump's comment is that it interferes with the historic independence that institution has enjoyed from the political branches of government and threatens to turn monetary policy.

The benchmark U.S. interest rate, which plays a large role in setting borrowing costs for mortgages, credit cards, small business and auto loans, was set at a range of 0.5 per cent to 0.75 per cent when Trump was sworn in.

People's Bank of China official Li Bo also told reporters that China's yuan exchange rate was primarily market driven and that flexibility of the yuan exchange rate had increased.

The president nominated Powell previous year to replace former Fed Chair Janet Yellen.

Beyond criticizing the Fed for raising rates, there's little Trump can do about it.

Trump has no say over the choice of the 12 regional Fed presidents like the Dallas Fed's Kaplan.

"It would take approximately three or four more federal funds rate increases of a quarter of a percent to get into the range of this estimated neutral level", Kaplan wrote in the essay, which was published by the Dallas Fed.

The Fed has raised interest rates twice this year already and is expected to do so again next month with consumer price inflation rising to 2.9 percent in July, its highest level in six years, and unemployment at 3.9 percent, the lowest level in about 20 years. "This can only happen to Trump", the president reportedly joked.

Despite criticism from the White House, economists give the Powell-led Fed very high marks. Powell, a Republican, has repeatedly said that he believes in the Fed's independence and that he and his colleagues that set interest rates will not bow to outside pressure.

Kohn said he didn't think Powell or the Fed would change their course because of Trump's remarks. "I'll let you know in seven years".

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