Trump 'not happy' with Fed's interest rate hike

US Fed raises benchmark interest rate to 2.25-pct

The Federal Reserve signaled its confidence Wednesday in the USA economy by raising a key interest rate for a third time this year, forecasting another rate hike before year's end and predicting that it will continue to tighten credit into 2020 to help manage growth and inflation.

The Fed also dropped a reference in its statement to the word "accommodative", although Chairman Jerome Powell later said policy was still accommodative.

The Fed removed language in its statement announcing the rate hike that described its monetary policy as "accommodative", signaling that the economy is strong enough to grow without help from the central bank.

The Fed on Wednesday (US time) lifted its short-term rate - a benchmark for many consumer and business loans - by a quarter-point to a range of 2 per cent to 2.25 per cent.

The Fed will give a big hint of what's coming when it releases its quarterly forecasts Wednesday. The U.S. dollar appreciated against all of the major currencies after the rate decision except for the Japanese Yen and Swiss Franc.

That's because the tariffs - and the resulting retaliation from America's trading partners - could weaken the US economy. And the unemployment rate sits at 3.9 percent, near its lowest level in 18 years.

John Williams, a long-time central banker and the newly installed president of the New York Federal Reserve Bank, earlier this month said the United States was experiencing a "goldilocks economy", meaning the Fed only needed to raise rates gradually.

After eight hikes since late 2015, the fed funds rate is now at the highest level since October 2008, just after the collapse of Lehman Brothers Holdings Inc.

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"Fed funds increases in September and December are as certain as can be", John Donaldson, director of fixed income at Haverford Trust, told CNBC.

"We've been hearing a rising chorus of concerns from businesses all over the country about disruption of supply chains, materials cost increases and loss of markets", Powell said.

"I would rather pay down debt or do other things", he added. I'm anxious about the fact that they seem to like raising interest rates.

Also, when Powell holds a press conference starting at 2:30 p.m. ET, he'll likely be asked about the risks of a trade war to the economy.

Trump has previously criticized the Fed for raising interest rates.

Saudi Arabia's central bank said it was raising its reverse repo rate by 25 bps to 2.25 per cent, and its repo rate by the same margin to 2.75 per cent. Bahrain's central bank raised its interest rate on its one-week deposit facility to 2.5 per cent from 2.25 per cent. Kuwait said it is keeping its key discount rate unchanged at 3 per cent. But he said that the economic impact of U.S. tariffs is "still relatively small". Ahead of Wednesday's statement, traders put the chance of a rate increase at 95%, according to CME Group. The benefits of tax cuts that took effect this year, along with increased government spending, for example, are widely expected to fade.

During his remarks Wednesday, Trump reiterated that Fed officials are raising rates because the USA economy is "doing so well".

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