ZCZC
BCN-09
US-BANK-RATE-INFLATION
Fed official says low inflation a risk to the US outlook
NEW YORK, May 23, 2019 (BSS/AFP) – Persistent low inflation is one of
“many risks” to the US economic outlook but that does not mean an interest
rate cut is likely any time soon, a Federal Reserve official said Wednesday.
John Williams, president of the New York Federal Reserve Bank, said he
would support a rate cut “down the road” if appropriate to get inflation back
to target but “I don’t think we’re at that point or will be in the very near
future.”
The central bank has been criticized — most aggressively by President
Donald Trump — for raising the benchmark lending rate four times last year
even though inflation never materialized as unemployment fell to the lowest
point in nearly 50 years.
Williams said the Fed is “fully aware” inflation has been running below
the central bank’s two percent target for a number of years but currently has
a “working hypothesis” that it is mostly due to transitory factors that “will
be reversed over the rest of this year.”
“There are many risks to the outlook, one is that inflation might get
stuck where it is today,” he said. “I would like to see inflation at the two
percent goal for an extended period.”
Some of the risks to the outlook that worried markets in December seem to
have receded, and Williams said he expects to see US growth this year “a bit
above two percent” while inflation should hit the Fed’s goal in the next year
or two.
So “there is not much to argue to move interest rates one way or the
other.”
Fed Chair Jerome Powell has made it clear in statements this year that the
central bank will be on hold and watching data to see whether another policy
adjustment is warranted but a growing share of economists now expect a rate
cut later this year.
BSS/AFP/HR/0945