Fed being ‘very aggressive’ on rates and ignoring things they shouldn’t

President Donald Trump has a point — the Federal Reserve is being “very aggressive” about raising interest rates, former Dallas Fed Vice President Jerry O’Driscoll told on Thursday.

“They’re ignoring things they should be paying attention to like the flattening yield curve, the strong dollar. I just don’t see the case for this aggressive stance,” he said on “Closing Bell.”

The Fed has raised rates twice so far in 2018 and has indicated two more hikes before the end of the year.

Fed Chair Jerome Powell has said he believes the economy is strong enough for the Fed to continue on the path of normalization.

On Wednesday, Trump’s top economic advisor, Larry Kudlow, said economic growth could top 4 percent for a quarter or two. On top of that, unemployment is near historic lows and inflation is now running around the Fed’s 2 percent target.

However, O’Driscoll doesn’t see why that should matter when it comes to increasing rates.

“I don’t see what’s wrong with strong economic growth and a low unemployment rate. I don’t think that that’s a problem,” he said.

Joe LaVorgna, chief economist at Natixis, “totally” agrees.

He said the markets are discounting another 75 basis points of hikes between now and 2020, while the Fed is indicating 150 basis points from here.

“While they think they are moving gradual, relative to what’s priced into the markets, relative to what other central banks are doing, [and with what] … will likely happen to the dollar, none of those developments to my mind are gradual hikes,” he said. “It’s relatively aggressive. And the markets back the president on this.”

Chart: Used with permission of Bloomberg Finance L.P.

Read more:

• Good price to buy British Pound
• Forex Intraday: EUR/USD has reached strong resistance
• Forex: AUD/JPY “Buy” from current levels
• Alexandre Lamfalussy: “We need to admit the euro was a mistake”
• NZD / USD, mixed signals from price action and formations. More likely long after the activation of a flag for increace