Fed Increases Key Interest Rate by 0.25% In Spite of Warnings from President Trump

The Federal Reserve has raised interest rates again despite President Donald Trump’s opposition.

The Fed’s key interest rate has been increased by 0.25% to a target range of 2.25%-2.5%.

However, the Fed officials also said future increases could come at a slower pace amid concerns about global growth.

The move comes two days after President Trump warned the Fed against making “yet another mistake” in raising rates, urging it instead to “feel the market”.

The president also urged the bank not to wind down a multi-billion dollar stimulus program brought in after the financial crisis.

President Trump – who appointed the Fed’s chairman, Jerome Powell – has repeatedly blamed the central bank for unsettled markets and dismissed analysts who cite other factors, such as rising trade tariffs.

His remarks have put pressure on the Fed, as presidents generally avoid criticizing the bank publicly, for fear of politicizing the institution.

Fed Raises Interest Rate by 0.25% for Third Time In A Decade

Federal Reserve Raises Interest Rates by 0.25 Percentage Points

President Trump tweeted: “I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!”

At a press conference on December 19, Jerome Powell defended the Fed’s independence, saying that political pressure played “no role whatsoever” in its discussions or decisions.

The Fed’s chairman added that the central bank had no plans to change its ongoing reduction of its portfolio of Treasuries and mortgage-backed securities.

The central bank has been gradually raising the benchmark rate since 2015, moving the US away from the ultra-low rates put in place during the financial crisis to spur economic activity.

The decision, which was widely expected, marked the ninth increase since 2015 and the fourth this year.

However, the moves have made borrowing more expensive, contributing to slowdowns in some sectors, such as housing.

With economic growth expected to slow, some worry that further increases risk stifling economic activity.

On December 19, officials did cut their forecasts for economic growth in 2019 to 2.3%, down from the 2.5% they anticipated in September.

Estimates released by the bank showed most Fed members expect two rate increases in 2019 – not three, as previously forecast.

It follows a downturn in financial markets and concerns about slowing growth in the US and abroad.

However, Jerome Powell said the strength of the US economy – which is expected to grow about 3% this year – justified another rate rise, despite recent “cross currents” that have weakened the outlook.

He said: “We think this move was appropriate for what is a very healthy economy.

“Policy at this point does not need to be accommodative.”

In its official statement, the Fed also said increases to its benchmark rate would help the US economy sustain its expansion, keeping the unemployment rate low and inflation near 2%.

Shares sank after the announcement, reversing earlier gains. The Dow and S&P 500 closed about 1.5% lower, while the NASDAQ fell than 2%.