As Federal Reserve Chair Jerome Powell kept the focus Thursday on global risks that could trigger a Fed rate cut in coming weeks, his colleagues from regional Fed districts painted a rosier picture of continued US economic growth and a solid business outlook.
WASHINGTON, July 10 ― The US Federal Reserve over the course of its 105-year history has changed monetary policy in reaction to property crashes, war, financial bubbles and policymakers' gut instincts about where the economy was heading. "Taking into account the downside risks at a time when inflation is on the soft side would argue for softening the expected path of monetary policy according to basic principles of risk management", she told a community banking group. The goal: to inoculate the world's biggest economy against the risk that weakening global growth and continued trade tensions between the United States and major trading partners including China will continue to sap investment and business confidence, crimping growth.
At the Fed's last policy meeting in mid-June, eight of the 17 policymakers saw the need for at least one rate cut by year's end, and Powell told reporters afterwards that many others were leaning in that direction. Economists expect the reduction will likely be a quarter-point. Almost all officials cut their forecasts for the short-term rate that the Fed controls, compared to the previous meeting, the minutes said.
Williams' remarks represent a sharp shift from his assessment in May, when he was asked whether a rate cut was needed to support inflation.
Richmond Federal Reserve President Thomas Barkin on Thursday said he sees a lot of "noise" in market-based measures of inflation expectations, suggesting that he discounts recent signals they may be flagging.
In prepared remarks released before the hearing, Powell contrasted the Fed's "baseline outlook" of continued US growth against a considerable set of risks - including persistently weak inflation, a slowdown in other major economies, and a downturn in business investment driven by trade risks.
The rate is now in a range from 2.25% to 2.5%. Bostic said he is going to go into the July Federal Open Market Committee meeting with an open mind.