Fed draws White House fire as it prepares to raise rates

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Will the Fed raise rates for a fourth time in 2018?

Amid brisk economic expansion after a decade of steady job growth, USA unemployment is flirting with a 50-year low, but the U.S. economy is expected to slow.

But this week, in the view of many analysts, the central bank could indicate that no more than two rate hikes are likely next year. That hike would keep rates low by historical standards but put them at the highest level in a decade.

The Fed has said the U.S. economy is healthy enough that the ultra-low rates put in place during the financial crisis are no longer necessary.

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.

-China trade war, still-mild inflation, stomach-churning drops in stock prices - may have left Fed officials weighing a shift in policy.

After the Wall Street Journal posted an op-ed, which suggested that raising interest rates will hurt the economy, Trump told the feds to listen to the publication.

It is highly unusual for a president to be publicly vocal in any criticism of the Fed, though many presidents have complained privately about higher interest rates.

Dow Jones chart Christmas 2018 interest rates
Dow Jones chart near technical support level

The rate is used as a benchmark for many consumer and business loans.

Still, the Fed is anxious about the economy overheating and says small, gradual interest rate increases are the best way to tap the brakes a bit to ensure inflation doesn't rise too quickly and bubbles don't form.

The president began criticizing Powell, his appointee, in July after three quarter-point rate increases in a row.

On Monday, in a tweet sent one hour before stock markets were due to open, Trump called it "incredible" that the Fed was "even considering yet another interest rate hike".

The president cited the strong US dollar, steady inflation rate, and slowing growth in China as key factors the central bank considers in determining the course of national monetary policy. "I don't like all of this work that we're putting into the economy, and then I see rates going up, I see China where they're - I mean look at what's happening with their currency, it's dropping like a rock".

President Trump's observations about the USA dollar and inflation aren't wrong.

Trump has made clear his unhappiness with Jerome Powell, the man he chose to run the Fed, over the past few months and has intensified his attacks as the markets have wobbled.

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