US Fed officials send more calming signals to markets

Washington: US central bankers on Wednesday seemed in lock-step in their desire to reassure financial markets that, for now, they will hold off on raising interest rates any further.
Three voting members of the Federal Reserve policy committee that sets the benchmark interest rate said on Wednesday the Fed could be patient before making another move.
Eric Rosengren, president of the Boston Federal Reserve Bank, one of 12 in the Fed system, said financial markets had become “unduly pessimistic” about the economic outlook but like others he agreed policymakers should heed their warning. The prospect of rising interest rates that could slow the economy spooked investors and contributed to the downturn in US and global stock markets late last year.
But after four rate hikes in 2018, Rosengren said in a speech, “I believe we can wait for greater clarity before adjusting policy.”
That dovish sentiment was echoed by Chicago Fed President Charles Evans, who said in a speech, “I feel we have good capacity to wait and carefully take stock of the incoming data and other developments.”
Fed Chairman Jerome Powell also sought to reassure financial markets last week, saying policymakers would be “patient” before making any further moves as they watched to see how the economy evolved, and could react quickly to any changes. But Rosengren, like Evans, are upbeat about the US economy, while acknowledging the growth will slow this year.
“Indeed, I personally suspect that financial market sentiment may have become unduly pessimistic,” Rosengren said.
However, St Louis Fed President James Bullard warned that the central bank could push the economy into recession if it raised rates much further.
The Fed would be “bordering on going too far and possibly tipping the economy into recession” if rates go higher, Bullard said in an interview with The Wall Street Journal.
As inflation shows no signs of accelerating much beyond the Fed’s two per cent target, there is no urgent need to raise the benchmark lending rate further, Bullard said. — AFP