WASHINGTON – After providing a cut-off percentage for a split decision earlier this week, Federal Reserve officials presented their divisions on the state of the economy and what to do in full view on Friday with delay warnings and financial risks. about how well things are going.
Central bankers can often be called to speak with one voice, but now the Fed has three – those willing to cut rates even lower to protect against economic risks, those willing to withstand and to look at the data for now and those who warn that the Fed may feed the credit bubble.
"The economy is in a good place," Fed Vice President Richard Clarida said in an interview with CNBC, noting that while there are risks, there is also a "virtuous circle" in the process of job growth, pay raises and increased household expenditure.
Consumption accounts for nearly 70% of the US economy, and "I can't think of a total time when the consumer was me in 'better shape,'" Clarida said.
That may be so, but other Fed officials said the focus should be elsewhere, though they disagreed exactly where. Such disagreements are common in the central bank, with 1
The unusual now is the clear divide and the reasons that determine it, and the political context of a president who wants deep rate cuts for a completely different justification.
But even those who agree with the lower rates see the situation differently, with St. Louis Fed President James Bullard arguing that this week the Fed had to reduce the weakness that includes the manufacturing sector, which "already looks like in a recession. "
Buller disagreed with the Fed's decision this week because he wants more cuts by half a percentage point and said in a written statement that he felt overall economic growth could also slow" in the near term horizon. "
"In my view, it is prudent risk management to aggressively reduce the policy rate now, and then increase it later if insufficient risks are not realized," Bullard writes. "Many estimates of the likelihood of a recession have risen from low to moderate levels."
The 7-3 vote lowered the target overnight policy rate by a quarter percent rate on Wednesday to between 1.75% and 2. 0% to offset the slowdown in global growth and the risks associated with Trump's trade battles with China.
This was the Fed's second rate cut this year.
But there was an even greater change in Fed policy prospects from late last year, when many officials expected to continue raising interest rates this year. Global growth and global bond markets began to push in the other direction, opening the gap last spring and summer between Fed policy forecasts and what investors
as a result of changing rates and updated economic outlook, narrowed the gap, a positive development for the central bank, whose senior officials are now careful not to lag behind what their next move might be until more information on basic health and the direction of the economy is available.
Following a series of negative news in the summer, recent figures include positive surprises, including stronger-than-expected home sales, stock markets approaching new records, and restarting US-China trade talks – countering the more appalling opinion of Bullard.
Boston Federal Reserve President Eric Rosengren said the Fed should guard against lending when the economy loses.
No additional monetary incentives are needed for an economy where labor markets are already tight, "Rougren writes in a note explaining his own disagreement with last week's Fed rate cuts.
He came from the opposite end of the spectrum like Bullard, arguing for a reduction in speed, challenging Trump's view that low rates are invaluable to the economy, Ronggren said the Fed's current policy is now actively pushing people for loans and "risks further inflating the prices of risky assets and encouraging households and businesses to take on too many levers."
This week's meeting was the first with three disagreements since September 2016, when Rosengren joined the other two, arguing for a rate hike.
Officials released last week show that the 17 Fed members split into roughly equal groups, with seven predicting another rate cut this year, five not seeing a change and five expecting the increase in the percentage will be appropriate by the end of the year.
The forecasts have been published anonymously, so it's not clear where the more influential employees are, and most importantly Powell and Clarida fit into this mix.
In his remarks, Clarida approached the language Powell used at a press conference Wednesday, stating that the Fed would "act as it should. , "and see the economic input for decisions that will be made" meeting by meeting. "