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The president of the US Central Bank on Wednesday dismissed criticism of Donald Trump on monetary policy decisions, judging on the contrary relevant the continued rise in interest rates in a dynamic economy.
The US administration confirmed earlier strong economic growth of 3.5% in the third quarter despite household consumption, the traditional engine of the world's largest economy, less sustained.
And, Jerome Powell still expects a strong pace for the entire year combined with a historically low unemployment rate. These data support the idea of continuing, for now, interest rate increases after the three already endorsed this year.
"Interest rates are always low if we take the historical criteria and they remain just below (…) a level that would be neutral for the economy, that is to say without stimulating , nor slow down growth, "he said in a speech to the New York Economic Club.
Shared opinions
These comments, which come in the wake of strong criticism of the Republican President accusing the Fed of making a mistake by raising its rates, were immediately welcomed on the markets who were waiting for details on this famous "neutral rate" and wanted to see in the remarks Mr. Powell signals a slowdown in the pace of rate tightening.
The specialists are very divided on what is concretely such a rate for a given economy. As for the United States, economists mention a rate around 3%. The key interest rate set by the Fed is currently 2.25%.
Jerome Powell also recalled that the Monetary Committee had estimated about three years ago that "extraordinarily low rates" were no longer in the interest of households, businesses, savers and borrowers.
He further stressed that the pace of "gradual increases" in rates has been designed to balance the two risks: neither too much stimulation nor slowdown. He also pointed out that Fed officials scrutinized the economic data carefully before making any decision. "The Fed is next to the plate," said Tuesday Donald Trump, regretting to have appointed Jerome Powell to this key position for the economy.
The White House tenant is far from the only one to worry about the Fed tightening interest rates after nearly a decade of virtually free money.
Some economists fear that this policy kills an almost perfect economy, with sustained GDP growth, unemployment at 3.7%, the lowest in 48 years, and controlled inflation.
Commercial War
For now, the Commerce Department confirmed Wednesday a sustained growth of 3.5% for the period July-August-September. However, this is a marked slowdown from the previous quarter, which had recorded a high in four years at 4.2%.
Exceeding 3% expansion was one of the goals of the 2016 campaign, and Republican President Donald Trump is expected to achieve this goal this year. But economists anticipate a slowdown in 2019 as the fiscal and fiscal stimulus fades. They also fear the effects of the trade war between the United States and its partners including China.
For the summer period, it is also trade essentially that explains the slowdown. The decline in exports of US goods and services is also more marked than initially estimated in October (-4.4% vs. 3.5%).
Increasing imports
Imports, which represent a cost for GDP (-1.36 points) for the period July-August-September, they, they, increased even more strongly (9.2% against 9.1% estimated in October) despite the additional custom duties imposed by the White House on imports of steel and aluminum and billions of dollars of Chinese imports.
This is due to advance purchases in July and August before the imposition of the second Chinese tariffs salvo imposed in September.
The US Central Bank (Fed) is banking on GDP growth of 3.1% this year. If this increase were to materialize, growth in the United States would be the fastest in the current expansion cycle, which is also one of the longest since it entered its tenth year last July.
Its Monetary Committee is due to meet on 18 and 19 December to decide on a possible further increase. For his part, Donald Trump will meet his Chinese counterpart Xi Jinping on the sidelines of the G20 in Buenos Aires this weekend to try to defuse the trade war. The US president said on Tuesday that there is "a good chance" that an agreement will be reached with Beijing. (Afp / nxp)
Created: 28.11.2018, 20:17
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