Economy

Fed rate hike, rate cut both 'on the table': Bostic

Fed rate hike, rate cut both 'on the table': Bostic

Trump - who, according to former Fed chair Janet Yellen, does not understand macroeconomic policy - has openly criticised Powell and the central bank's monetary tightening policy, saying that rate hikes hurt the economy, and tweeting in December "the only problem our economy has is the Fed".

Followed by the reveal of latest Fed policy, there had been signs of reverting back interest rate lower for loans used to purchase house and cars, eventually prodding the U.S. citizens to purchase more.

The Fed on Wednesday said it would stop scaling back the vast portfolio of bonds they built up to spur an economic recovery from the 2007-2009 financial crisis and recession.

Trump was so incensed by the Fed's policies he is said to have sought advice late previous year on whether he could fire its chairman, Jerome Powell.

Asked if the Fed should be cutting interest rates instead, he said was unsure.

The Fed has become increasingly anxious about meeting its 2 percent inflation target and sceptical that the Trump administration's tax cuts and deregulation will unleash faster economic growth. Placing him on the board may be the president's attempt to check Powell and head off further tightening of US monetary policy that Trump believes could slow economic growth before his 2020 re-election campaign.

"I am open to all possibilities as we aim to support sustained economic expansion, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective", Bostic said, referring to the policy-setting Federal Open Market Committee. Mr Trump discussed firing Mr Powell.

Moore has often embraced a confrontational tone in his commentary on the Fed.

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Trump had made an offer to Moore this week after speaking with him to compliment him on an opinion article he co-authored in the Wall Street Journal, that newspaper reported earlier, citing a senior administration official.

Moore's selection is just the latest step in Trump's effort to exert control over the USA central bank, which was designed by Congress to be independent from short-term political pressure.

This approach, Moore has argued, would have prevented the Fed from raising rates as much as it has. But we would have been over four (per cent growth) if they didn't do all of the interest rate hikes. "Isn't this all starting to sound familiar?"

Fed officials on Wednesday penciled in a long-term growth estimate of 1.9 per cent for the U.S. economy.

"The Fed may still suffer some "losses" on these securities sales, but the danger of future inflation and political pressure outweigh the consequences of these losses", he wrote.

Moore if confirmed would fill one of two vacancies on the seven-member board.

The Fed's policy rate is now set at 2.25 per cent to 2.5 per cent.

"Presidents certainly use appointments to shape monetary policy -if the Senate is willing to go along, that is", said Sarah Binder, an economics professor at George Washington University.