Chicago Fed chief says wait-and-see approach is sensible
HONG KONG With downside risks looming and uncertainties rife, the US Federal Reserve is prudent to wait for more economic data before deciding whether to raise rates or cut them, Chicago Federal Reserve Bank president Charles Evans said yesterday.
"If growth runs close to its potential and inflation builds momentum, then further rate increases may be appropriate over time to ensure the economy settles in on its long-run sustainable growth path and that inflation runs symmetrically about our 2 per cent target," Mr Evans said in remarks prepared for delivery in Hong Kong.
"In contrast, if activity softens more than expected or if inflation and inflation expectations run too low, then policy may have to be left on hold - or perhaps even loosened - to provide the appropriate accommodation to obtain our objectives."
Last week, the US central bank left rates steady in a range of 2.25 per cent to 2.5 per cent. Fresh forecasts showed 11 of 17 Fed policymakers expected no rate change for the rest of the year, up from two in December. That unexpectedly dovish signal had financial markets pricing in a rate cut next year.
Fed chair Jerome Powell cited low inflation, a slowing global economy and risks like US trade tensions with China for the need to remain patient.
Mr Evans, who votes on interest-rate policy this year, had as recently as January said it was entirely plausible the Fed could raise rates twice this year.
While his comments yesterday did not rule out such a scenario, he said he had become less sanguine about the economic outlook since last autumn as uncertainties over global growth and trade policies increased. Recent economic data has been softer than anticipated. - REUTERS
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