US Federal Reserve Bank of San Francisco President Mary Daly said growing uncertainty among businesses could slow demand in the US economy, but does not require a change in interest rates.
Business leaders in her Fed district have conveyed that “uncertainty surrounding the economy and economic policy is elevated,” Daly wrote on LinkedIn on Friday.
“Economic research will tell you that uncertainty is a source of demand restraint,” she said. “We are also getting some mixed signals from markets.”
Photo: Reuters
However, Daly made it clear that she believed officials did not need to adjust policy when the Federal Open Market Committee (FOMC), the Fed’s policy-setting panel, gathers next week in Washington.
“The FOMC has interest rates in a good place,” she said. “And there are plenty of signs that the economy is solid.”
Daly said she favors stepping back to examine the economy rather than reacting “to each headline, newsflash, forecast or market gyration.”
Her comments follow remarks on Friday from Fed Chairman Jerome Powell, who said he believes officials “do not need to be in a hurry” to adjust policy despite increased uncertainty in the US economic outlook.
At an event in New York hosted by the University of Chicago Booth School of Business, Powell said that recent indicators suggest consumer spending might moderate, while surveys of household and businesses point to heightened uncertainty about the economy’s direction.
“It remains to be seen how these developments might affect future spending and investment,” he said.
Fed policymakers are widely expected to leave the central bank’s key policy rate unchanged when they next meet on Tuesday and Wednesday next week.
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