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US central bankers see no reason to pause the current course of gradual rate hikes that have infuriated President Donald Trump and some even say the Federal Reserve may soon need to slow the economy, according to meeting minutes released Wednesday.
But, amid brisk American expansion, some Fed policymakers also warned of looming dangers to the world economy, such as the potential for a strengthening US dollar and possible contagion from sputtering emerging markets, according to minutes from the Fed’s most recent meeting three weeks ago.
The Federal Reserve’s steady increases in benchmark lending rates have enraged the president, who has called the bank ‘crazy,’ ‘loco’ and his ‘biggest threat,’ in contrast to previous presidents who in recent decades refrained from comment on decisions of the independent Fed.
Still, the minutes showed that, for the moment at least, American policymakers were largely in agreement about the near future – despite the increasing heat from the president, who fears higher rates will derail his economic agenda.
Further rate hikes ‘would most likely be consistent’ with the current period of firming inflation and historically low unemployment, according to the minutes released Wednesday.
On the other hand, while risks were ‘roughly balanced,’ some Fed members said instability in emerging economies – many of which are heavily indebted and vulnerable when US rates rise – could ‘spread more broadly through the global economy and financial markets.’
Unemployment fell last month to 3.7 percent, its lowest level since 1969, and economists say the central bank is unlikely to be pushed off course by Wall Street selloffs or other noise.
The central bank expects to raise its key lending rate again in December – its ninth increase since 2015 – and three more times next year.
This would move US interest rates slightly above what policymakers say is ‘neutral’ – that is, neither slowing nor speeding the economy – but some participants said the Fed would need to go even further than that.
Risk from a rising dollar
‘A few participants expected that policy would need to become modestly restrictive for a time,’ according to the minutes.
Others said that, to avoid creating asset bubbles or having inflation run above the Fed’s two-percent target for too long, the central bank would have to raise rates ‘above their assessments of its longer-run level.’
Still, a ‘couple’ of participants said they would oppose this unless clear danger signs – an overheating economy and mounting inflation – were to arise.
The Fed also took notice of clouds forming on the horizon.
Markets fear currency crises in Turkey and Argentina and other emerging market economies could spread beyond their borders – something that could be sparked as investors pull out to take advantage of higher rates in the United States.
Furthermore, ‘some’ at the meeting said risks grew as the US economy increasingly outpaced its rivals’ more sluggish growth ‘because of the potential for further strengthening of the dollar.’
Stronger US currency makes American exports more costly to foreign buyers, possibly weighing on growth, and makes many debt payments more costly for foreign borrowers.
Some investors say that, after years of easy money, pockets of risk have built up throughout the global economy – raising the chances that a bubble could burst or banks could see significant defaults on debt as borrowing costs begin to increase.
Fed members said Trump’s trade wars both created uncertainty and could boost inflation.
The White House has put punishing tariffs on more than $250 billion in annual Chinese imports. 
Companies facing higher materials costs told the Fed they had an ‘increased ability to raise the prices of their products,’ according to the minutes.
Wall Street, which had struggled through much of the day, closed slightly lower, with stocks paring losses after the minutes’ release.