Federal Reserve officials are pushing back against the notion that the central bank should cut interest rates soon, with several policy makers saying in recent days their next move still may be another hike.
“I would never say never to a cut. But in this point, in my forecast, I don’t foresee it for this year or next year,” Philadelphia Fed President Patrick Harker, who is scheduled to vote next on rate decisions in 2020, said Thursday in Philadelphia. “At this point, we have no need to rush any changes” in the federal funds rate, he said.
The comments come after President Donald Trump said he will nominate Heritage Foundation economist Stephen Moore to fill one of two vacant seats on the seven-member Fed board in Washington. Moore, long an ally of the president, told the New York Times in an interview that he favored cutting rates by as much as a half percentage point, though he’s also said he needs to do more research. His initial call for a rate cut has been echoed by White House National Economic Council Director Larry Kudlow.
Moore’s could-be colleagues at the central bank do not agree. Several policy makers have said in recent days that they still see future rate increases as the most likely outlook, and even those who do not expect an imminent hike are calling for a prolonged pause in which monetary policy remains on hold.
“Could we be done with policy rate increases this cycle? It is possible,” Cleveland Fed President Loretta Mester said Thursday in Columbus, Ohio. She added that if the economy performs in the way she thinks is most likely -- with economic growth picking back up after a soft first quarter -- “the fed funds rate may need to move a bit higher than current levels.”
After months of hectoring from Trump amid four rate hikes in 2018, Fed officials put rate increases on hold earlier this year to take stock of slowing global growth and muted inflation. Like Mester, several officials have signaled optimism that the economy might still merit a rate increase later this year if risks from to China, Europe and trade don’t further dent the expansion.
Boston Fed President Eric Rosengren still thinks the central bank’s next rate move is more likely to be a hike than a cut, he told Bloomberg News in a late-March interview.
Others, including Chairman Jerome Powell, sound less confident, indicating a rate cut may be as likely as a rate increase. But all of the officials who have spoken since the Fed’s March meeting agree that no decisions are required in the short term.
“Monetary policy is in the right place,” New York Fed chief John Williams said on Thursday. “The outlook is positive. GDP growth is on track, unemployment remains low, and there are no signs of inflationary pressures building.”
Moore, who has not yet been formally nominated, was a major critic of the Fed’s 2018 rate increases, which he at one point called “economic malpractice.”