Federal Reserve Chair Janet Yellen on Wednesday rebuffed accusations from presidential candidate Donald Trump that the Fed plays politics with its interest rate policy.
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“Yes, of course we are anxious that bubbles could form in the economy and we routinely monitor asset valuations”, said Fed Chair Janet Yellen at the press conference after the Fed’s September meeting. The Fed also cut its projections for where rates will end 2017 by half a point to 1.1 percent and by the same amount for 2018 to 1.9 percent.
Mr. Trump and his top advisers have lambasted the central bank and Ms. Yellen in recent weeks, accusing the Fed chief of keeping interest rates “artificially low” to help President Barack Obama, thereby creating the illusion of a healthy economy.
After not making a rate hike at its last six meetings, the bank’s credibility is under scrutiny after investors and experts anticipated as much as four rate hikes in 2016.
The 17 Fed policymakers will have to balance a strong labor market, marked by an unemployment rate of 4.9 percent and job gains that are outpacing population growth, with inflation that is still well below the central bank’s 2 percent target and weak August readings for manufacturing and service industry activity. Some Fed officials believe it demonstrates there is little slack left in the economy holding inflation down and that the time to push rates higher has already arrived.
The decision extends United States central bankers’ run of getting cold feet amid risks from overseas and inconsistent signs of economic strength.
Bond prices fell. The yield on the 10-year Treasury note rose to 1.70 percent.
The Fed last hiked in December, its only move higher in a decade. Duke Energy jumped 2.2 percent and AT&T gained 1.5 percent.
Stocks are higher on Wall Street ahead of the Fed’s decision on interest rates.
The target range for the benchmark federal funds rate remains at 0.25% to 0.5%, where it’s been since a quarter-point increase in December 2015 that ended seven years of near-zero rates. Fed officials said they expected that economic growth would not exceed 2 percent over the next three years.
Strength emerged in the energy sector after crude oil futures jumped on a large drawdown in USA oil inventories.
While it displayed patience about moving rates, the Fed’s description of the economy was generally upbeat and underscored its argument that the case for a rate increase had strengthened.
The Federal Reserve held off on a rate hike, but three officials opposed the decision – the most dissents since December 2014.
In the currency market, the Canadian dollar gained 0.59 of a cent at 76.30 cents United States, as the November crude oil contract headed up by $1.29 at US$45.34 per barrel.
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The Fed, divided by a 7-3 vote, with the minority wanting a 25-basis-point hike now, appeared to be at cross purposes with itself. Homebuilders had slumped Tuesday after the USA government said construction of new homes slowed down in August. And there is no evidence that growth in consumer prices – inflation – is accelerating.
