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Three Fed Officials Offer Diverging Views on Rate Cuts in TV Interviews — Update

By Michael S. Derby 

Three Federal Reserve officials offered diverging views on the path for monetary policy in television interviews on Thursday.

Two officials expressed skepticism over the need for lower rates. A third said a further move down in the short-term borrowing costs is very much a possibility. All spoke on CNBC on the sidelines of the Kansas City Fed's annual research conference in Jackson Hole, Wyo.

"My sense was we've added accommodation, and it wasn't required in my view," Kansas City Fed leader Esther George said. "In my view with this very low unemployment rate, with wages rising, with the inflation rate staying close to the Fed's target, I think we're in a good place relative to the mandates that we are asked to achieve."

Ms. George was one of two Fed leaders who dissented against the Fed's decision to lower rates in July. The Fed dropped its overnight-target rate range by a quarter-percentage point.

While officials saw the economy performing well, they lowered rates to offset the risks posed by slowing global growth and trade uncertainty. Lower rates were also targeted at boosting what has been persistently low levels of inflation relative to the 2% goal.

Ms. George acknowledged trade and slower global growth are real issues, and said "whether they begin to spill over in a way that we see the effects on the real economy is what I'm watching for."

Patrick Harker of the Philadelphia Fed also pushed back against the need for lower rates on CNBC. "We're roughly where neutral is" for monetary policy, he said. "I think we should stay here for a while and see how things play out," he said on the channel.

Mr. Harker isn't currently a voter on the rate-setting Federal Open Market Committee. He had also expressed opposition to a rate cut ahead of the July meeting. The Boston Fed leader also voted against the July rate cut.

In contrast, Dallas Fed leader Robert Kaplan said that while he would like to avoid lowering rates again, that path was still possible. "From a risk management point of view, if I see continued weakness, I'm at least going to be open-minded" about a cut, he said.

Mr. Kaplan, who is not currently a voter on the FOMC, signaled that after supporting the July cut, he is leaning toward doing more.

"Cutting rates hurts savers, it pushes people to take more risk, and I'm very cognizant of that," Mr. Kaplan said. But "I'm also cognizant if we wait till we see weakness in the consumer to take action, we've probably waited too long. And I'm very well aware we probably don't have that much ammunition," given the already low level of rates.

"When the fed funds rate is well above rates all along the Treasury [yield] curve, and we are seeing some weakness in manufacturing and global growth, I think it may make sense to take some action on the policy rate from a risk management point of view," Mr. Kaplan said.

The regional Fed leaders spoke ahead of Friday's hotly anticipated speech by Fed Chairman Jerome Powell. Financial markets broadly expect the Fed to lower rates further as the year progresses.

Write to Michael S. Derby at


(END) Dow Jones Newswires

August 22, 2019 17:02 ET (21:02 GMT)

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