Today, Jerome Powell, the Federal Reserve chair, defended the policy of raising the interest rates to protect the economy. This comes after the attacks of President Donald Trump on the rate increases.
Powell said that he believes that the policy regarding gradual interest rate increases “remains appropriate” for the economy of the United States.
He stated: “The economy is strong. Inflation is near our two per cent objective, and most people who want a job are finding one… If the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate.”
Talking at the annual meeting of the Fed at Jackson Hole, he said that the Fed has been “navigating between the shoals of overheating and premature tightening with only a hazy view of what seem to be shifting navigational guides.”
The comments of Powell come days after Trump said that he was “not thrilled” with the decision of the Fed of increasing interest rates as he attempted to stimulate economic growth and take on China in a trade dispute.
The Fed is anticipated to increase the rates in September, and possibly again in December, and continue what it refers to as “normalisation” into the coming year.
The dollar slump after the release of the comments of Powell.
David Madden, a Market analyst at CMC Markets UK, stated: “Traders were expecting a slightly more hawkish announcement, and the neutral tone pushed the US dollar lower.”
The chief investment officer at Premier Asset Management, Neil Birrell, stated: “What is clear is that the Fed views the economy as being in a robust state of health and policy will reflect that; rates are likely to rise in September. There isn’t really much new here, but this should provide support for the dollar and help equities even though the bull run is an extended one.”