Gold futures rise on weakened USA dollar

26 August, 2018, 23:09 | Author: Frank Williams
  • Powell signals more hikes ahead if US economy stays strong

The Federal Reserve's steady interest rate hikes are the best way to protect the U.S. economic recovery and keep job growth as strong as possible and inflation under control, Fed chairman Jerome Powell said yesterday in a high-profile endorsement of the central bank's current approach to policy.

New orders for key USA -made capital goods increased more than expected in July and shipments growth held firm, the Commerce Department said.

Strong Performance The Fed chairman said he expected the economy's "strong performance will continue" and as a result the Fed's "gradual process of normalization remains appropriate".

"If the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate", Powell said.

I'm still waiting for the headlines to read "Powell Crushes the Dollar", but I'm not holding my breath because the financial press likes it better when Trump does it, it sounds more negative.

Two top US Federal Reserve officials on Thursday said that US President Donald Trump's complaints that interest rate increases by the Fed could hurt the US economy would not affect their decisions on whether to raise rates.

The dollar index fell 0.58 percent, while the euro and Japanese yen rose against the greenback.

Powell's comments were not a direct response to Trump's criticism that he is "not thrilled" with the Fed raising rates as he is trying to stimulate economic growth.

Powell said he is well aware of the consequences of the Fed acting too aggressively.

The Fed has been coming to Jackson Hole since 1981.

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Federal Reserve chair Jerome Powell sees plenty of reasons the US economy's strong run will continue.

The U.S. Federal Reserve has already hiked twice in 2018 and is on the path to lift interest rates two more times before the end of the year.

The Fed has raised its key policy rate seven times since late 2015 after seven years of keeping the rate at a record low near zero to help the economy recovery from the Great Recession.

But central bankers are faced with a series of questions about the Fed's plans, including its possible impact overseas.

"Expressions of angst about higher interest rates are not unique to this administration", she said in a separate interview with CNBC.

Other policymakers present in Jackson Hole this week have flagged what they see as the risks from Trump's trade policies, which have led to tit-for-tat tariffs with China, the European Union, Canada and others. Meanwhile their trade war escalated with activation of another round of duelling tariffs on $16 billion worth of each country's goods.

The yield curve between two-year and 10-year notes has flattened to 19 basis points, from 33 basis points at the beginning of August and 83 basis points in February, as investors price rate hikes into shorter-dated notes.

Powell devoted his speech Friday to defending the Fed's actions against critics - both those who, like Trump, say the Fed is raising rates too quickly and those who say the Fed is moving too slowly. The protesters wore green T-shirts reading "The Fed wants more of us unemployed".

With unemployment so low, "why isn't the (Federal Open Market Committee) tightening monetary policy more sharply to head off overheating and inflation?"

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