The Treasury yield curve reached its flattest level since 2007 on Friday as comments by Federal Reserve Chairman Jerome Powell affirmed expectations that the US central bank will continue raising rates.
Speaking to an annual conference of central bankers in Jackson Hole, Wyoming, the Fed chairman says the central bank recognizes that the path of inflation is so uncertain that it generally needs to strike a balance between being supportive of growth and being restrictive.
The Fed´s steady interest rate hikes are the best way to protect the USA economic recovery and keep job growth as strong as possible and inflation under control, Powell said at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyoming. "I'm not thrilled", Trump said, referring to Powell.
Increasing consensus on the need to continue raising US interest rates was on display at the start of the global central bankers meeting, as the longstanding distinction between so-called policy hawks, centrists and doves blurs in the face of falling unemployment.
Interest rate futures traders are pricing in a 98-percent chance of a rate hike at the Fed's September meeting, and a 68 percent chance of an additional hike in December, according to the CME Group's FedWatch Tool.
"The economy is strong", he said.
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More importantly, Powell's take on inflation has likely alleviated fears of faster policy tightening. Two top Fed officials made clear Thursday that Trump's criticism won't affect their decisions on whether to continue raising rates. "We are seeing some of the more cyclical sectors like energy, materials, continuing to move higher on the expectation that the Fed is going to let the economy run a little hot", Mr Zaccarelli said. "It's easier for them to do their job if they're given independence and they don't have people harping at them politically".
St. Louis Federal Reserve President James Bullard does not want the central bank to raise rates again this year. The president has complained that the Fed's tightening of credit could threaten the continued strong growth he aims to achieve through the tax cuts enacted late a year ago, a pullback of regulations and a rewriting of trade deals to better serve the United States.
A Grand Teton National Park officer stands watch Friday outside the room where the Jackson Hole Economic Policy Symposium was taking place at Jackson.
Not all of Powell's Fed colleagues are on board with his policy of continuing to boost the federal funds rate.
After having kept its key policy rate near zero for seven years to help lift the economy out of the Great Recession, the Fed has raised rates seven times, most recently in March and June this year. "Inflation has moved up and is now near the Federal Open Market Committee's (FOMC) objective of 2 percent after running generally below that level for six years".