Fed’s Rosengren Suggests Rate Pause May Last ‘Several Meetings’

(Bloomberg) — Federal Reserve Bank of Boston President Eric Rosengren said it may take policy makers “several meetings” to determine whether risks to the U.S. economy will clear up or more seriously hamper growth in 2019.

“There is some risk that more pronounced slowdowns in the rest of the world could dampen U.S. growth more than I am forecasting,” Rosengren said in the text of a speech he’s scheduled to deliver Tuesday in Boston. He said he continues to expect the economy will expand by slightly more than 2 percent this year.

Questions over China’s weaker growth, Brexit, European banks and four Fed rate hikes in 2018 might all affect outlook, he said.

“It may be several meetings of the Federal Open Market Committee before Fed policy makers have a clearer read on whether the risks are becoming reality,” said Rosengren, who votes this year on the rate-setting FOMC. “It is a good time for policy makers to be patient, taking the time to evaluate the risks.”

Turmoil in financial markets helped convince Fed officials in recent weeks to back away from their December projections for two rate hikes in 2019. Several policy makers, including Chairman Jerome Powell, have emphasized their intention to be “patient” in deciding when and how next to adjust rates.

The FOMC will meet again March 19-20 in Washington, with investors and most economists predicting they will keep rates on hold for their second straight gathering. They left rates unchanged after a Jan. 29-30 meeting.

Rosengren, among the more hawkish Fed officials in 2018, made clear he fully supports that stance. In addition to highlighting downside risks, he said his earlier concerns over potential overheating had abated.

“I expect inflation to end 2019 close to the Federal Reserve’s 2 percent target, and some financial stability risks have been reduced as recent financial market volatility has tempered investor ebullience,” he said. “In my view, there is less reason to fear overheating.”

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