On Tuesday Kansas City Federal Reserve President Esther George addressed the question of why she supported a pause in the increase of interest rates, stating that she did so to allow the Fed to gauge the impact of previous rate hikes on the economy.
Key Takeaways
- George told a Kansas City audience that the Fed could benefit from assessing how much rate hikes might be slowing the economy.
- George is typically a hawkish policymaker more concerned with addressing recessionary pressure through inflation measures than with economic expansion.
- While rate hikes typically slow expansion, the current economic conditions may be favorable enough to allow for some experimental policies.
It may be that the US economy, which is now coming up on the longest ever period of expansion, is so strong that the central bank is in a position where it can afford to pause rate hikes purely for research purposes and learn from the impact of rate hikes in order to inform future policy decisions.
A voting member of the FOMC, George supported the decision reached in a recent FOMC meeting to signal that the central bank was holding off on rate hikes for the time being by scrapping language that has consistently been used to suggest upcoming rate hikes.
On Tuesday she suggested that the Fed simply steps back in order to “see what happens,” an atypical approach from a traditionally hawkish policymaker who has often been very outspoken in her support for tighter monetary policy such as raised interest rates.
George stated that inflationary pressures were not strong in her opinion and pointed to concerns regarding economic activity worldwide – recent polls have shown that the likelihood of a world recession is increasing and multiple regions have seen diminished growth over the last year with factors such as Brexit and trade protectionism adding to the period of economic turbulence.
President of Fed in Kansas City Esther George: The economy is in a good place.
- BBG— DailyFX Team Live (@DailyFXTeam) February 13, 2019
Market Reaction
Gold is posting gains of 0.27% today, currently hovering below the midrange at $1,310.40/oz with a high of $1,314.30/oz and a low of $1,308.38/oz, well above the $1,300 line of support.
Gold Price Chart
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