Minutes of the Federal Reserve’s last policy meeting suggest that come September, the central bank will likely raise rates for a third time this year. In June, the Fed raised the federal funds rate 25 basis points to its current level of 2.
Fed officials stated that if the incoming economic data supports its views, “it would likely soon be appropriate to take another step in removing policy accommodation,” according to the minutes. Per MarketWatch, current market odds are showing a 96% probability of a rate hike in September and 60% chance of another in December.
Source: tradingeconomics.com
Trade War Concerns
While the latest economic data like the gross domestic product growing by 4.1% during the second quarter and the bull market run in U.S. equities portend to a growing economy, trade concerns between the United States and China could make the Fed pensive prior to September and keep rates unchanged.
“Most expressed the view that an escalation in international trade disputes was a potentially consequential downside risk for real activity,” the minutes said.
U.S. President Donald Trump once again took jabs at Federal Reserve Chairman Jerome Powell for raising interest rates, telling political donors at a fundraiser in the Hamptons recently that he hopes the Fed Chair eases up on monetary policy.
Since January 2017 when President Trump took office, the Federal Reserve has hiked interest rates fives times versus just once during former president Barack Obama’s tenure. With major stock market indexes closing in on record highs, the prevailing sentiment is that two more interest rate hikes will occur prior to the end of 2018.
“He (Trump) was questioning why it was happening,” one person at the event said, according to a Dow Jones report. “He made a reference to things going so well, so why bother” raising rates.
In an interview with CNBC, U.S. President Donald Trump unsurprisingly made his discontent known publicly, saying he’s “not happy” about the Federal Reserve’s latest monetary policy moves to raise interest rates. In typical Trump fashion, the president took to social media to say that the U.S. “should not be penalized because we are doing so well.”
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