Further US rate hikes 'most likely' needed: Fed minutes

Every policymaker backed the Fed's September rate increase, according to the minutes of the Sept. 25-26 meeting, published Wednesday.

The discussion, revealed in minutes of the September 25-26 meeting released Wednesday, shows that a few participants believed that the Fed's key interest rate would need to "become modestly restrictive for a time" to guard against inflation climbing too high. The median view of all Fed officials was that rates should be increased one more time this year and three times next year and a final quarter-point rate hike in 2020.

Still, the minutes released on Wednesday showed that, for the moment at least, American policymakers were largely in agreement about the near future - despite the increasing heat from the President, who fears higher rates could derail his economic agenda.

"This gradual approach would balance the risk of tightening monetary policy too quickly, which could lead to an abrupt slowing in the economy and inflation moving below the Committee's objective, against the risk of moving too slowly, which could engender inflation persistently above the objective and possibly contribute to a buildup of financial imbalances", the minutes said. U.S. Treasury yields were little changed.

Trump followed up previous strong attacks on the Fed by complaining again that interest rates are rising too quickly.

"Because the Fed is raising rates too fast".

Furthermore, "some" at the meeting said risks grew as the United States economy increasingly outpaced its rivals" more sluggish growth "because of the potential for further strengthening of the dollar'.

The release of the minutes comes amid growing tensions between the White House and the Fed, which is an independent agency.

FILE PHOTO: A jogger runs past the Federal Reserve building in Washington, DC, U.S., August 22, 2018.

In the minutes it says "a couple" of policymakers stated that they would not be in favour of adopting a restrictive policy stance without "clear signs of an overheating economy". The display of solidarity raises the prospect of a fourth rate-hike this year in December. The Fed continues to debate the precise short-term neutral rate, while its median estimate for a long-run neutral rate is 3 percent.

Despite his criticism of the Fed's policymaking, Trump's picks have been seen as representing the mainstream of economic thinking about how a central bank should manage interest rates.

Inflation rates hit a six-year high in July.

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