WASHINGTON–The Fed may have adjourned its rate-setting meeting last week with a decision to lower the range for the federal funds rate by 25 basis points, but plenty of discussion about what’s next continues.
In remarks this week, Federal Reserve Chair Jerome Powell signaled a measured approach to future interest rate cuts, warning that lowering rates too fast could fuel inflation, but waiting too long could hurt the jobs outlook.
Speaking in Providence, R.I., Powell said, “If the Fed were to cut rates too aggressively, we could leave the inflation job unfinished and need to reverse course later and raise rates. But if the Fed keeps its rate too high for too long, the labor market could soften unnecessarily.”
With inflation rising slightly, but joblessness up, Powell admitted last week, “It’s challenging to know what to do.”
‘Behind the Curve’
Meanwhile, other Fed governors continue to share their own views, with Michelle Bowman stating she believes the Fed is now “behind the curve” in responding to the weaker job numbers.
“Now that we have seen many months of deteriorating labor market conditions, it is time for the committee to act decisively and proactively to address decreasing labor market dynamism and emerging signs of fragility,” Bowman said. “Should these conditions continue, I am concerned that we will need to adjust policy at a faster pace and to a larger degree going forward.”
Three Presidents, Three Views
As the CU Daily reported here, three different Fed bank presidents offered three different views on how they believe the central bank should proceed.
