Rates likely to fall over medium term, says senior Fed official
Investors currently expect the Fed to cut the policy rate by a quarter of a percentage point in June and again in December.
THE US Federal Reserve can continue cutting interest rates at least “over the medium term,” Fed Vice-Chair Philip Jefferson said on Tuesday (Feb 4), reiterating the US central bank’s message that policymakers needn’t rush their next rate cut.
“Overall, the US economy is starting the year in a good position. I expect inflation’s slow descent to continue, and I anticipate that economic growth and labour market conditions will remain solid,” he said in remarks prepared for delivery at Lafayette College in Pennsylvania.
“(In that situation), over the medium term, I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance as the most likely outcome,” Jefferson said. “That said, I do not think we need to be in a hurry to change our stance.”
“As long as the economy and labour market remain strong, I see it as appropriate...to be cautious in making further adjustments,” he said.
The outlook for this year is good, he said, but “we face additional uncertainties about the exact shape of government policies, as well as their economic implications.”
At its policy meeting last week, the Fed held its benchmark interest rate steady in the 4.25 to 4.5 per cent range. Inflation remains more than half a percentage point above the Fed’s 2 per cent target and has shown little improvement over the last half year.
While Fed policymakers are confident price pressures continue to ease in the economy, they are also watching closely to understand the net impact of the Trump administration’s tariff, immigration, tax and other policies.
Investors currently expect the Fed to cut the policy rate by a quarter of a percentage point in June and again in December. REUTERS
Share with us your feedback on BT's products and services
