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Federal Reserve official says interest rates nearing final goal

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The Federal Reserve can "pause" before taking another step to raise its policy interest rate which "may be closing in on" its final destination, a member of the rate-setting committee said Tuesday.

[WASHINGTON] The Federal Reserve can "pause" before taking another step to raise its policy interest rate which "may be closing in on" its final destination, a member of the rate-setting committee said Tuesday.

Esther George, president of the Kansas City Federal Reserve Bank, one of 12 regional banks under the central bank umbrella, said the Fed can no longer assert with certainty that more rate hikes are on the way.

It was yet another signal to financial markets that the Fed, after a total of nine increases in the benchmark lending rate in the past three years, will hold off for a time.

"A pause in the normalisation process would give us time to assess if the economy is responding as expected," Ms George said in a speech prepared for delivery in Kansas City.

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She noted that the increases to date had had an effect on the economy "and the effects will need to be watched carefully" but she said "we must acknowledge that rates are approaching, and may be closing in on, our destination of neutral" - the level that neither stimulates nor restricts the economy.

"It is possible that some additional rate increases will be appropriate. But making that judgment is not urgent and should depend on a careful look at the data" to know how far and how fast the Fed needs to move, Ms George said.

With financial markets increasingly concerned about the slowing of the US and global economies, Ms George said uncertainty had increased due to the trade confrontations under President Donald Trump.

And presiding over the regional Fed at the center of the American farm belt, Ms George said farmers were feeling the impact.

"Uncertainty about trade policy and global economic growth has increased, possibly causing businesses to postpone or rethink capital spending projects," she said.

The farm sector is suffering from "a prolonged downturn...made worse by retaliatory tariffs on US farm products."

China has imposed steep tariffs on US soy beans, which essentially halted imports as a result of Mr Trump's decision to slap punitive duties on more than US$250 billion in Chinese goods.

AFP