Fed chief stands firm on rate policy

Fed chair Jerome Powell’s highly anticipated speech: what to expect

Fed chair Jerome Powell signals rate hikes ahead if U.S. economy stays strong

While it might seem odd that there is debate over whether a 2 percent interest rate is too high, it should be remembered that the key rate spent years at zero percent following the financial crisis.

"Global risk sentiment remains somewhat jittery ahead of Fed Chair Powell's speech with US-Sino trade talks failing to yield any immediate progress", strategists at OCBC Bank wrote.

The Fed´s steady interest rate hikes are the best way to protect the US economic recovery and keep job growth as strong as possible and inflation under control, Powell said at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming.

Federal Reserve Chairman Jerome Powell will not lack for urgent topics to address when he gives the keynote speech Friday to an annual gathering of global central bankers in Jackson Hole, Wyoming. So, as of now, the Fed has little reason to push rates above the neutral territory and/or hike rates at a faster pace.

Investors said they were reassured that Powell's comments stayed in line with previous commentary from the Fed regarding policy.

St. Louis Federal Reserve Bank President James Bullard on Friday raised new alarm bells over the USA central bank's plan to keep raising interest rates, warning that even one more rate hike could set the stage for recession.

Once unemployment falls below that level, inflation pressures can build, forcing the Fed to raise interest rates.

White House audio recordings show that President Richard Nixon pressured then-Fed Chairman Arthur Burns to keep interest rates low to boost Nixon's re-election chances in 1972. The Fed is widely expected to resume doing so at its next policy meeting late next month. He further added the USA central bank should do more to help him to boost the economy.

On Wall Street, the Dow Jones Industrial Average .DJI rose 133.37 points, or 0.52 percent, to 25,790.35. The president has complained that the Fed's tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late past year, a pullback of regulations and a rewriting of trade deals to better serve the United States.

This week, Trump complained in an interview with Reuters that he was "not thrilled" with Powell's Fed for raising rates. On Thursday, two top Fed officials made clear Thursday that Trump's criticism won't affect their decisions on whether to continue raising rates.

"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", he said in prepared remarks. Under the Fed's rotating voting system for Fed regional bank presidents Bullard does not have a vote this year, but he participates in rate-setting discussions.

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