Fed sees US economy on track

    52

    SAN RAMON, Calif./NEW YORK- US central bankers on Wednesday expressed confidence they have borrowing costs at the right level to sustain growth and lift inflation to healthier levels, despite what businesses say is a lingering drag from uncertainty over US trade policy.

    But even during the signing ceremony for a trade deal with China that promises to clear up some of that uncertainty, President Donald Trump reprised a long-running gripe against the Federal Reserve, and appeared to identify a possible new Fed chair who might fix the problem.

    “I could have used you a little bit here,” Trump said to former Fed Governor Kevin Warsh, who made no secret in Trump’s first year in office that he wanted the Fed chair job. Trump picked Jerome Powell instead, a move he has since said he regretted. “Why weren’t you more forceful when you wanted that job? … I would have been very happy with you. But Kevin, thank you for being here. You understand that very well, right?”

    From there, Trump launched for the first time in about a month into what has been a recurrent complaint against the Powell Fed.

    “We’re the number one [economy] in the world by far, and we have to pay for our money,” Trump said, contrasting US borrowing costs with Europe’s negative interest rates, a function of that region’s slower growth and dimmer outlook. “Our interest rates are set high by the Fed. Our dollar’s very high.”

    That is not the way Fed policymakers see it.

    Last year, with Trump waging a trade war with China and other countries, and Europe slowing, the US central bank cut rates three times to a target range of 1.5 percent to 1.75 percent, a level it expects to stick to for the time being.

    Rates are currently in a “good place,” unless there is a substantial change in inflation, Philadelphia Fed President Patrick Harker said on Wednesday in New York, adding that low rates can encourage excessive risk-taking.

    Dallas Fed President Robert Kaplan, speaking at a separate event in New York, voiced renewed skepticism that negative rates can help economic growth and said he expects the US economy to grow at about 2 percent this year, slower than last year but still fast enough to push down on unemployment in his view. – Reuters