Despite Trump criticism, Fed sees need for more rate hikes

The New York Stock Exchange building. A selloff in US markets on Wednesday 10 sparked a round of global selling

FBN's Jennifer Schonberger gives a summary of the Federal Reserve's minutes from its September meeting.

Rate rises have become a divisive issue in the USA, with Donald Trump repeatedly criticising monetary policy decisions and labelling the Federal Reserve his "biggest threat". The display of unanimity could bolster expectations the central bank will raise rates a fourth time this year in December.

The release of the minutes comes amid growing tensions between the White House and the Fed, which is an independent agency.

Participants in the Fed's rate-setting committee also "generally anticipated that further gradual increases" in short-term borrowing costs "would most likely be consistent" with the kind of continued economic expansion, labor market strength, and firm inflation that majority are anticipating, the minutes showed.

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

Fed Chairman Jerome Powell has said the central bank will monitor interest rates to avoid raising them too quickly, which could hamper US growth.

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 may need to go even further than that.

U.S. stocks closed slightly lower and U.S. Treasury yields gained a bit as traders continued to bet on further rate hikes ahead.

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Last week, Trump criticized the USA central bank twice, saying it was raising interest rates so swiftly that it threatened the country's economic health.

Though the minutes did not refer to any of Trump's criticism, its message of further rate increases suggests that policymakers are not fazed by it.

United States presidents usually remain silent on such issues in respect toward the Fed's independence.

Still, policymakers noted that the relative weakness of the worldwide economy could create "potential for further strengthening of the USA dollar", a factor that could weigh on US exports.

The minutes did note concerns about the impact of Trump's get-tough trade policies, citing business contacts who expressed worries about lost markets and rising prices for steel and aluminum.

During the meeting, which was held on September 25-26 policymakers said they believed further rates rises were required to stop inflation from shooting the 2pc inflation target and to reduce the risk "posed by significant financial imbalances".

The minutes showed that "almost all" policymakers agreed it was time to remove that language.

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