Despite some muddled signals on the economy, Federal Reserve governor Randal Quarles is upbeat about the growth prospects and said the central bank could stay the course on gradual interest rate increases.
Randal Quarles, the USA central bank's vice chair of supervision, who rarely discusses monetary policy, said he was optimistic about the economy's prospects, and that calls for continued "stable, gradual, and predictable" policy tightening.
Worries over rising US rates and a stronger dollar added to the sour tone, as well as the effect of a trade war between Washington and Beijing.
With the Fed expected to continue raising rates and the United States projected to nearly double its debt load held by the public to $29-trillion in the coming decade from $16-trillion today, further weakness in bonds and the greenback is likely.
Janet Yellen, former chairwoman of the central bank, has warned that the president's attacks could undermine financial stability. Raising rates will slow borrowing and lower asset values, but it will also help contain inflation. "We just may not agree on how to get there".
NO: The Fed is an independent body and they are making decisions on what they think the market can handle. Instead, those rates are set by the markets and influenced by many factors including inflation, government spending and overall investor confidence.
Meanwhile, the S&P 500 Futures traded 0.33 percent lower at 2,807.00 by 10:40GMT, while at 10:00GMT, the FxWirePro's Hourly Dollar Strength Index remained neutral at -3.86 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). Ergo, the Federal Reserve should be prudent and very careful with each additional increase.
"The economy keeps surprising to the upside".
"The more the economy's potential growth increases, the more gradual we can be in our removal of monetary policy accommodation", Quarles said.
There is ample research on the USA and elsewhere showing that a one-percentage-point increase in the budget deficit has the effect of raising interest rates a quarter of a percent, or more. Unemployment is near a 49-year low. The goal was to bring interest rates to a higher level with the aim of having a buffer against any major crisis.
Results from Cessna business jet-maker Textron, equipment renter United Rentals, and hand tools maker Snap-on Inc, which slid between 2.33% and 9.23%, only served to show corporate profit has little room to grow.
NO: The Federal Reserve is not being too aggressive with rates.
The Treasury Department does have the ability to bypass the Fed and directly influence rates-by intervening in the currency markets.
"Incorporating these developments yields a modernized policy rule that suggests the current level of the policy rate is about right over the forecast horizon, " or the next several years, Bullard said Thursday in a speech in Memphis, Tennessee.
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