The independent U.S. central bank raised borrowing rates Wednesday for the fourth time this year, dismissing President Donald Trump’s contention that policymakers ought not tinker with the country’s robust economy, the world’s largest.
The Federal Reserve board voted 10-0 after a two-day meeting to increase its benchmark short-term interest rate — which is the rate that banks charge each other on overnight loans to meet reserve minimums — by a quarter percentage point to a range of 2.25 percent to 2.5 percent, its highest point in a decade.
But the Fed also took note of clouds on the horizon for the U.S. economy, saying it expected to increase rates again only twice in 2019, not three times as it had previously projected.
It also cut its 2019 economic growth forecast for the U.S. from 2.5 percent to 2.3 percent, both figures well off the 4.2 percent U.S. growth in the April-to-June period and the 3.5 percent figure from July to September.
Stock prices have sunk
Policymakers said they would closely watch “global economic and financial market developments and assess their implications for the economic outlook.” In the last several weeks, stock market indexes in the U.S. and elsewhere have fallen sharply, a plunge for some U.S. market indicators that wiped out all previous 2018 gains.
The interest rate set by the Fed often affects borrowing costs throughout the U.S., for major corporations and consumers, and often sets the standard for global lending rates.
Trump had no immediate comment on the latest boost in interest rates, but earlier in the week implored policymakers to forgo another increase:
But central bank policymakers operate independently of White House oversight, and Wednesday's quarter-point increase had been widely expected.
Trump has basked in a robust U.S. economy, even as numerous investigations engulf him and his 2016 presidential campaign, and key advisers have quit his administration or been forced out.
U.S. trade disputes are ongoing with China, and world stock market volatility has cut investor gains in recent weeks. But the 3.7 percent jobless rate is the lowest in the United States in 49 years, worker wages are increasing and consumers — whose activity accounts for about 70 percent of the U.S. economy — are spending.
Unhappy with Powell
But Jerome Powell, the Fed board member Trump named a year ago as chairman, had drawn the president's ire by overseeing three interest rate hikes this year ahead of the latest one.
Trump last month said he was "not even a little bit happy" with his appointment of Powell.
Trump has said he thinks the Fed is "way off base" by raising rates, but has been powerless to stop it from boosting them. Central bank policymakers have raised interest rates to keep the inflation rate in check and keep the economy from expanding too rapidly.
"I'm doing deals and I'm not being accommodated by the Fed," Trump told The Washington Post last month. "They're making a mistake because I have a gut and my gut tells me more sometimes than anybody else's brain can ever tell me."
Some economists are predicting, however, that the decade-long improving U.S. economy could stall in the next year or so and perhaps even fall into a recession, which, if it occurs, would in most circumstances call for cutting interest rates to boost economic activity.
Source: VOA news