Momentum for Fed rate cut picks up with more backing

  • Business
  • Monday, 24 Jun 2019

"I have been urging my colleagues: 'Hey let's take it easy,'" Kashkari(pic) said in a town hall in Long Lake, Minnesota, his first public comments after Fed policymakers decided last week to be patient on raising rates any further.

WASHINGTON: The drumbeat for a Federal Reserve interest rate cut is getting louder, with one policy maker calling for a 50 basis point reduction.

Minneapolis Fed president Neel Kashkari said he’d advocated for such a move at the central bank’s June 18-19 meeting, where officials ended leaving rates unchanged.

Other policy makers speaking on Friday didn’t go as far as Kashkari, considered one of the Fed’s more dovish officials. But their comments reinforced expectations that the Fed is on course to reduce rates, perhaps as soon as its July 30-31 gathering.President Donald Trump, who’s sharply criticised Fed chairman Jerome Powell for keeping credit too tight, said Thursday that he expected the central bank to lower rates. “Can’t win it all. Eventually he’ll do what’s right,” the president said of Powell.

Powell’s deputy Richard Clarida said on Friday that the argument for easier policy has strengthened recently as the economic outlook has turned more uncertain.

“The case for providing accommodation has increased,” Fed vice-chairman Clarida said in a Bloomberg Television interview. “There’s been a marking down in global growth prospects. There’s been uncertainty about international trade.”

Trump is slated to meet Chinese President Xi Jinping at the June 28-29 summit of Group of 20 nations in Osaka, Japan, to try to head off a further escalation in the trade war between the world’s two biggest economies. The president also has threatened to impose tariffs on auto imports from Japan and the European Union.

Adding to the uncertainty are heightened tensions in the Middle East after Iran shot down a US drone and Trump tweeted he came within minutes of launching a retaliatory attack. On Saturday Trump said that military action is “always on the table”.

Fed governor Lael Brainard also sounds open to a rate cut, even as she describes the US economic outlook as solid. — Bloomberg

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