Despite Trump's Criticism, Feds Hike Interest Rates

Despite Trump’s Criticism, Feds Hike Interest Rates

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Despite Trump's Criticism, Feds Hike Interest RatesDespite the strong warning by President Trump and appeal by economists the Federal Reserve has gone ahead and increased key interest rates by 0.25 % to meet its target range of 2.25 to 2.5 %. The central bank officials that voted to increase the rate also stated that future increases will be carried out at a slower pace due to concerns about global growth rate. Fed Chairman Jerome Powell who had been appointed by Mr. Trump has been blamed time and again for unsettling markets with increasing interest rates every few months. Mr. Trump also urged Feds not to close down the stimulus program that had been created to stabilize the economy after financial crisis.

After carrying out the increase Mr. Powell defended the move saying that political pressure did not play any role in the bank’s discussions or decision making process. He affirmed that the bank did not have any immediate plans of changing its plans of reduction in portfolio of Treasuries and mortgage backed securities. The bank started raising benchmark interest rates since 2015 that were put in place to reduce the impact of financial crisis and encourage economic activity.

This move by Federal Bank to increase interest rates which is the ninth since 2015 has led to slowdown in housing sector. This has led to worries in some quarters that further as the economy is slowing down the interest rate increase will stifle economic activity. Bank estimates shows that Fed will increase rates only twice next year due to slowdown in growth in both US and overseas but Mr. Powell stated that US economy is strong and expected to grow by 3 % so they went ahead and made the interest rate increase this week. The increase in these interest rates led to a sharp fall in share markets that reversed gains made last week and while DOW and S&P 500 closed 1.5 % lower, Nasdaq fell by 2 %.

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