Fed officials push back against second rate cut ahead of Jackson Hole
Three regional Federal Reserve presidents voiced skepticism about the need for the U.S. central bank to lower interest rates, potentially setting the table for a divide among policymakers about the best path for monetary policy at their upcoming meeting in mid-September.
During separate television interviews on Thursday, Kansas City Fed President Esther George and Philadelphia Fed President Patrick Harker both questioned the need for easier monetary policy, citing strong economic data in the U.S., including a healthy labor market and low inflation.
George, alongside Boston Fed President Eric Rosengren, voted against the July rate cut — when policymakers, for the first time since the financial crisis, lowered the interbank lending rate by 25 basis points. The target range is currently between 2 percent to 2.25 percent.
“As I look at where the economy is, it’s not yet time, I’m not ready, to provide more accommodation to the economy without seeing an outlook that suggests the economy is getting weaker,” George said on Bloomberg News during an interview that aired Thursday.
In order to make her decision regarding more accommodative monetary policy, George told FOX Business’ Edward Lawrence she needed to see upcoming data releases, including the August jobs report and the revised second-quarter GDP estimate.
“We have a very low unemployment rate right now,” she said. “The job market looks healthy. The consumer seems to be healthy right now and inflation is low and stable. It's staying right around the Fed's target. So in light of that, while I see downside risk, I wasn't ready to act on that relative to the performance of the economy.”
Harker followed Esther, telling CNBC that while he went along (somewhat reluctantly) with the central bank’s rate cut last month, he doesn’t see the case for another round of stimulus, pointing to strong labor markets and inflation that’s gradually increasing.
“We’re roughly where neutral is right now and I think we should stay here for a while and see how things play out,” Harker, who is not a voting member of the Federal Open Market Committee, said.
Traders are currently pricing in about a 93 percent chance of a 25 basis point cut next month, according to the CME’s FedWatch tool.
Earlier in the week, Rosengren pushed back against another round of rate cuts, arguing that he didn’t believe uncertainty from the U.S.-China trade war or slowing global growth will significantly hurt the U.S. economy.
“We’re likely to have a second half of the year that’s much closer to 2% growth,” Rosengren said Monday. “I’m not saying there are not circumstances in which I’d be willing to ease. I just want to see evidence we are going into something that is more a slowdown.’’
Fed Chairman Jerome Powell, during his speech at the Jackson Hole Economic Symposium at 10 a.m. ET. on Friday, could shed light on monetary policy going forward.
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