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Central banks should 'act quickly' during 'distress': Federal Reserve's Williams

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Wall Street took the remarks by John Williams - the influential vice-chairman of Federal Reserve's monetary policy committee - as another sign the Fed is prepared to cut the benchmark lending rate later this month as insurance against an economic slowdown.

[NEW YORK] Central banks should move quickly to address economic pain when interest rates are already low, a senior Federal Reserve official said on Thursday.

Wall Street took the remarks by John Williams - the influential vice-chairman of Federal Reserve's monetary policy committee - as another sign the Fed is prepared to cut the benchmark lending rate later this month as insurance against an economic slowdown.

Mr Williams cited studies suggesting that when monetary policy is already easy, central banks should "move more quickly than you otherwise might" rather than waiting "for disaster to unfold."

When rates are higher, authorities "can afford to move slowly and take a 'wait and see' approach," he said in a speech to a meeting of economic researchers,

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"When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress," said Mr Williams, who is president of the New York Federal Reserve Bank.

With interest rates still low in major economies, economists worry central banks like the Fed may not have much firepower to respond to slowing growth.

The Fed raised the key policy lending rate four times last year, but given recent signs of a slowing economy amid rising global trade tensions, the policy committee is expected to cut the rate at the July 30-31 meeting, the first easing move in a decade.

After trading in the red for most of the day, the benchmark Dow Jones Industrial Average turned positive following Mr Williams' remarks, finishing up by a fraction of a point at the closing bell.

AFP