Two top US Federal Reserve officials on Thursday said that US President Donald Trump’s complaints that interest rate increases by the Fed could hurt the US economy would not affect their decisions on whether to raise rates.
Kansas City Federal Reserve Bank President Esther George said she believes that two more rate increases this year “could be appropriate” in light of the strong economy.
Dallas Federal Reserve Bank President Robert Kaplan said he expected three to four rate hikes over the next nine to 12 months.
Both separately dismissed any notion that Trump’s critical comments about the Fed’s rate increases would factor into their policies.
“Our job at the Fed is to make decisions on monetary policy and supervision without regard to political considerations, and I’m confident we’ll continue to do that,” Kaplan told CNBC in an interview.
George, in a separate CNBC interview, said: “Expressions of angst about higher interest rates are not unique to this administration.”
She suggested that the US Congress had “anticipated this kind of tension when they designed the central bank, and they put firewalls in place so that the central bank can be independent and carry forward with its decision making.”
The remarks from Kaplan and George came as central bankers gathered for their annual summer conference in Jackson Hole, Wyoming, sponsored by the Kansas City Fed.
Fed Chairman Jerome Powell was to give the conference’s keynote address yesterday morning, with investors focused on what he might signal about the future path of rate hikes in light of Trump’s comments and economic developments.
Despite the risks from trade disputes, George said in her interview that she believes the economy is performing strongly and regards further Fed rate hikes as justified.
“I think two more rate hikes this year could be appropriate,” she told Bloomberg TV.
Kaplan said that he believed the Fed should raise rates “three or four times over the next nine to 12 months” to lift its key policy rate to a neutral level, where it is neither boosting growth, nor restraining the economy.
The Fed’s key rate is in a range of 1.75 percent to 2 percent and officials have pegged the neutral rate at 2.9 percent. That would suggest that three to four more quarter-point rate increases would lift the policy rate to the Fed’s perceived neutral level.
In June, the Fed predicted a total of four hikes this year, up from an earlier estimate of three.
Trump has expressed unhappiness about the Fed’s rate hikes, after having kept silent during his first year in office when the Fed boosted rates three times under former Fed chairwoman Janet Yellen. Trump tapped Powell to succeed Yellen after deciding not to offer her a second term.
The firewalls that protect the Fed’s independence are needed to allow “the Fed to keep its focus on the public interest and the long-run nature of the economy and that’s what we’re doing,” George told the Fox Business Network.
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