NEW YORK (Reuters) – Slower U.S. economic growth is not necessarily “cause for alarm” but instead a “new normal” people should expect, a top Federal Reserve official said on Wednesday, underscoring policymakers’ comfort with rates at current levels.
New York Fed President John Williams (NYSE:) has slightly downgraded forecasts for economic growth to around 2 percent as violent markets late last year constrain consumer and business spending now.
But Williams told the Economic Club of New York that the “as-good-as-it-gets” result would be right on target with the potential growth in the United States, justifying current interest rates, which are at a “neutral” level that neither encourages nor discourages economic activity. Weakening Chinese and European economic growth justify the Fed’s patient stance on rates, he said, largely reiterating earlier comments.
“With a strong labor market, moderate growth, and no sign of any significant inflationary pressures, the baseline outlook is quite favorable,” Williams said in remarks prepared for delivery in New York. “What will the response of the Fed be? My short answer: It depends!”
Williams is a permanent voting member of the Fed’s rate-setting committee and leader of the bank charged with implementing the policy. The committee meets later in the month to chart future policies but markets have all but written out the chance that a rate hike would be in the cards.
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Source: Investing.com
