“The economy is not functioning as if moderately restrictive politics were retaining it,” Powell said.
The Federal Open Market Committee () did not make changes in the rate on Wednesday, keeping it in the range of 4.25% to 4.50%, where it has been since December.
However, two members of the Committee, Michelle Bowman and Christopher Waller, voted against their colleagues. Both wanted to reduce the rate by 25 basic points to 4.00% to 4.25%.
Dissident votes are notable since FOMC has historically voted in Lockstep. Individual dissident votes are rare, but two are not almost unknown votes. That last time there were two dissident votes about a FOMC decision more than 30 years ago in 1993, according to Kiplinger’s.
It should also be noted that Adriana Kugler was absent and did not vote at all. President Jerome Powell, Vice President John Williams, Michael Barr, Susan Collins, Lisa Cook, Austan Goolsbee, Philip Jefferson, Alberto Musalem and Jeffrey Schmid voted to keep the rates in the same way.
High inflation and economic uncertainty
In his statement, the FOMC said that economic growth was moderated in the first half of the year, citing swings in net exports. In addition, Fed officials said unemployment is still low and that labor market conditions are solid. On the other side of the double mandate of the Fed, inflation remains somewhat high, as well as uncertainty about economic perspectives.
“In support of its objectives, the Committee decided to maintain the objective range for the federal fund rate by 4.25 percent to 4.50 percent. When considering the scope and time of additional adjustments to the range of objectives for the federal fund rate, the Committee will carefully evaluate the incoming data, the perspective of evolution and the balance of the risks,” reads the statement.
He added that the committee would be prepared to adjust the position of monetary policy if risks arise that prevent the achievement of these objectives.
“The evaluations of the committee will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments,” added the statement.
“Very good meeting”
In his press conference that followed the release of the FOMC declaration, Powell said that the effects on the inflation of changes in government policy remain uncertain. But he acknowledged that there is “a reasonable base case that the effects could be of short duration.” However, they could also have long -term inflation effects, so the committee is being cautious.
Powell also identified the Fed position as “moderately restrictive”, and added that “it seems to me and almost the entire committee that the economy is not functioning as if moderately restrictive politics were stopping it.”
Just today, the second quarter was released and showed a 3.0% growth in the second quarter and a 1.2% growth in the first half of the year.
Powell did not comment on whether or not the committee was lower rates in September, saying that any decision will be based on incoming data.
The president of the Fed was also asked if the recent trade agreements brought more certainty with respect to tariffs. Powell declared that it is a “very dynamic moment for these commercial negotiations”, but the effects will take time and that “there are many uncertainties to solve.”
Finally, in the two dissident votes, Powell said that everyone presented a clear explanation of his thinking. “This was a good meeting around the table,” he said.
Original publication
!function(f,b,e,v,n,t,s){if(f.fbq)return;n=f.fbq=function(){n.callMethod? n.callMethod.apply(n,arguments):n.queue.push(arguments)};if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;n.queue=[];t=b.createElement(e);t.async=!0;t.src=v;s=b.getElementsByTagName(e)[0];s.parentNode.insertBefore(t,s)}(window, document,’script’,’
Source Link
