The Fed will conclude its final policy meeting of the year Wednesday. That hike would keep rates low by historical standards but put them at the highest level in a decade.
USA trade disputes are ongoing with China and world stock market volatility has cut investor gains in recent weeks. On top of that, Chairman Jerome Powell has suggested that the Fed's gradual rate increases over the past three years have already raised its benchmark rate almost to the point where too many further increases could weaken the economy.
Against this backdrop, observers are closely watching whether the central bank will slow down the pace, following eight rate hikes since 2015, when it ended the unusual zero percent rate policy.
Ten years after the financial crisis, the USA economy is chugging along nicely. That's under the Fed's inflation target is 2%.
But analysts and former Fed members say Trump's unprecedented vitriol could cause the central bank to prove its independence by raising rates even if policymakers might otherwise have held off.
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The Fed's rates help set borrowing costs for various types of loans.
"The only question is whether a rebound will begin ahead of the Fed decision tomorrow, or whether another quick flush is due before tomorrow's widely-expected rate hike". Powell will speak at a news conference at 2:30 p.m.
If the Fed does downgrade its economic outlook, it would help solidify expectations that it's poised to scale back its rate increases next year. "We believe the USA economy can sustain strong performance next year, but it can ill afford a major policy error, either from the Fed or the rest of the administration", Druckenmiller said in a December 17 op-ed published by The Wall Street Journal. Trump's "50 B's" may refer to the Fed's current policy of reducing its bond holdings by a maximum of US$50 billion per month. But while economists don't like Trump's Fed bashing, there are some who are starting to agree with the president that it's time for the Fed to hit pause on the rate hikes. What is the "normal" interest rate at this point?
The president pointed to the Wall Street Journal editorial page which urged the Federal Reserve to "pause its double-barreled blitz of higher interest rates".