The Federal Reserve President of Boston Eric Rosengren has advised wait and watch policy for reduction in interest rates as bank can afford patience as the economy is still going strong. Speaking barely a couple of weeks before the date when Fed is expected to reduce interest rates. Rosengren stated that there are likely to be uncertainties and risks due to economic conditions but these are not strong enough to start the first rate reduction since 2008 when the financial crisis occurred.
He insisted that as the economy is relatively strong and the inflation is also likely to be in the range of 2 percent the economic growth is relatively satisfactory the environment does not require external action. But if the economy changes or the trade situation changes drastically due to business conditions and likewise if there is dramatic slowdown in Europe and China then Fed Bank would react to it.
Rosengren’s views have put him on opposite side of views of Fed Chairman Jerome Powell and other policymakers what are supporting rate cut by quarter point during July 30-31 Federal Open Market Committee Meeting. Markets are poised on confirmation of 25 basis point reduction while a hopeful 41 percent is awaiting a 50 basis point cut. He is joined by Fed President of Kansas Esther George who has also stated that there is no need for a rate cut just yet.
Others favoring a rate cut stated reasons like detrimental tariff impact, global slowdown, debt ceiling negotiation and weak inflation as serious concerns. Rosengren insisted that there are no sign of real slowdown as job market is buoyant. But Fed official James Bullard the Fed president for St. Louis has stated that there an “insurance” cut could serve as a form of buffer in case any of the potential weaknesses skyrocketed. A move like this would offset rate increase of December that was criticized heavily by Mr. Trump.
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