Feds Talk About Inflation Without Broaching Rate Cuts – Market News Store

Feds Talk About Inflation Without Broaching Rate Cuts

Officials of Federal Reserve are walking a thin line as they try to convince the local population that wages will go higher without discussing about future cuts in interest rates. They are aiming for inflation of 2 % which is low enough for comfort and is at a decent rate to protect against price declines that will damage the economy. This is a target that central bank has tried to maintain for several years. As price increases of food products and fuel have remained at level of 1.6 % across the year till March, consumers are expecting inflation to remain at low levels.

In view of this development White House is urging Federal Reserve to introduce interest rate cuts and bring stimulus into the economy. Vice President Mike Pence made a direct request to Fed through a CNBC interview to consider marginal cuts in interest rates as there is no inflation. However Fed Chairman Jerome H. Powell stated that no such steps will be taken at present as price gains are likely to emerge soon. This sentiment was echoed by regional presidents C. Evans and James B as they too urged caution over hasty action.

While Mr. Evans stated that low inflation has elevated his concerns that it will be too slow to move up to goal levels of 2 %, Mr. Bullard stated that this was the time to wait and watch about how economy would evolve after Fed’s decision to put a stop to further increases in interest rates. Though he remained concerned about low inflation levels he advised wait and watch action till second quarter of 2019. Fed VC Richard Clarida also confirmed that under current economic situation it is advisable to be patient. During a gathering of academics and central bank economists at Stanford University he stated that as economy is operating close to dual objectives of stable inflation and full employment, Fed can afford to wait and watch data without any adjustments.

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