Fed's Rosengren doesn't see the case for a US rate cut

  • Fed's Rosengren doesn't see the case for a US rate cut

Fed's Rosengren doesn't see the case for a US rate cut

Boston Federal Reserve Bank President Eric Rosengren on Friday came out strongly against a US interest rate reduction, saying that with stocks at near-record highs and an unemployment rate near a 50-year low, the economy does not need it.

"The framework the Fed found itself in during the 1960s and 1970s raised doubts that the central bank could attain its goals, likely related to the concern that the Fed had not been as independent of short-run goals as it should have been, resulting in elevated inflation", Rosengren said in the text of a speech on central bank independence he's to deliver Friday.

Rosengren acknowledged that growth had slowed since last year and that global risks had increased, but said he still expects the US economy to expand by about 2 per cent this year. So, if that were to change, I'd be happy to ease that point.

"As long as the economy's doing well, if that continues we don't need accommodation", he said.

Rosengren made the comments after traders on Thursday priced in an aggressive half-percentage point interest rate cut, and then reversed that bet after the New York Fed hinted that comments from its influential chief about acting aggressively to counter a possible downturn may have been misconstrued as guidance for the outcome of Fed's July policy meeting. But those expectations were deflated just hours later when a New York Fed representative said the comments were not meant to signal policy actions at the upcoming meeting. Policy makers, behind Fed Chairman Jerome Powell, raised rates four times in 2018 before pausing the tightening cycle as Trump's trade disputes helped darken the outlook for global growth.

While Rosengren did not mention Donald Trump, the USA president has continually expressed his displeasure with the central bank. On Friday, Trump took to Twitter yet again to reiterate calls for lower rates, slamming the Fed for what he called its "faulty thought process".