With the first U.S. interest rate reduction in a decade expected later this mont...
CHICAGO - With the first U.S. interest rate reduction in a decade expected later this month, two Federal Reserve policymakers sketched out arguments on Tuesday on how deep the cut should be, even as a third said she needs more data before being ready to sign on at all.
The competing cases made Tuesday by the two policymakers supportive of a rate cut suggested the decision of whether to reduce rates by a quarter or a half of a percentage point could hinge on whether the goal is to guard against developing risks in the world economy and signaled by bond markets, or deliver a solid jolt meant to boost inflation in the United States.
The Fed set the goal as a way to keep businesses and households forward looking, and help assure a modest pace of price and wage increases. Evans and others are concerned that if they continue to undershoot, they will lose credibility and their statements and policies will become less effective.
But neither the inversion of the yield curve nor concern about muted inflation or headwinds that may slow economic growth was enough to convince San Francisco Fed Bank President Mary Daly yet of the need to ease policy. Policymakers have cited international risks, the uncertainty of President Donald Trump’s trade policies, the pricing in bond markets and weak inflation, among other factors, as cause to cut interest rates even though the economy is growing and unemployment is at a record low.Fed Chairman Jerome Powell, speaking in Paris on Tuesday, reiterated a pledge to “act as appropriate” to keep the U.S. economy humming.
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