Daily Trends Now
Daily Trends Now

After the Fed's likely rate hike this week, all bets are off

After the Fed's likely rate hike this week, all bets are off

Analysts expect the USA central bank will raise rates at the end of its two-day policy meeting on December 19.

On Monday, in a tweet sent one hour before stock markets were due to open, Trump called it "incredible" that the Fed was "even considering yet another interest rate hike".

After days of heavy stock market falls, Trump tweeted before NY trading opened on Tuesday to warn the Federal Reserve that it would be compounding previous mistakes if it continued to ratchet up U.S. borrowing costs.

The president isn't wrong about the dollar, which has made modest gains against a basket of currencies, hitting a 19-month high at close on Friday. Analysts widely expect the central bank to raise short-term interest rates, but the focus will be on the outlook for next year.

Nearly all economists expect the Fed to raise rates again at its meeting this week, while many also see the central bank making increases next year, although at a slower pace in the face of a possible economic recession.

Trump has criticized the Fed and its Chairman Jerome Powell, saying borrowing costs have been raised too quickly.

-China trade war, still-mild inflation, stomach-churning drops in stock prices - may have left Fed officials weighing a shift in policy.

But it has come under intense pressure from President Donald Trump, who has warned against another hike.

"Every time we do something great, he raises the interest rates", Mr. Trump said in an October 23 Oval Office interview with The Wall Street Journal, adding that Mr. Powell "almost looks like he's happy raising interest rates".

On July 20, Trump told CNBC that he was "not happy" about the Federal Reserve raising interest rates.

"We have zero inflation for all practical purposes, so on Wednesday, the only argument I'm hearing for the Fed to raise rates now, is that somehow they have to exert their independence from the White House", Navarro said. This will allow the central bank to pause the hiking cycle next year without causing shocks to expectations.

But it does place an even greater importance on the Fed's dots this time around.

The Fed will conclude its final policy meeting of the year Wednesday.

The president pointed to the Wall Street Journal editorial page which urged the Federal Reserve to "pause its double-barreled blitz of higher interest rates".

Powell himself could provide clarity in his news conference if he indicates where he thinks the "neutral rate" is.


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