A top US central banker says the US economy is in good shape and able to withstand the mounting risks of uncertainty and turmoil possibly coming from overseas.
Kristian Rouz — A prominent member of the Federal Reserve’s policy board and key ally of Chairman Jerome Powell says the US central bank is likely to continue raising interest rates at next month’s meeting. The official also said the Fed would continue its course of monetary tightening next year as well.
President of the Federal Reserve Bank of New York John Williams said the ongoing normalisation of monetary conditions would still support US economic expansion. Williams said the labour market remains strong and is showing signs of further improvement — as employers have now to compete for the scarce workforce.
“Over the next FOMC (Federal Open Markets Committee) monetary policy meeting, we’re going to do what we’ve been doing as best we can — we’re going to find a… gradual path of the monetary policy back to a more normal level of interest rates,” Williams said.
The official made his remarks during an event at the New York City Hispanic Chamber of Commerce in the New York borough of Bronx.
Williams shrugged off the reports of mounting economic turmoil overseas, heightened tensions in global trade, and the possibility of elevated financial volatility at home in the US. He said the strength of the US economy is guiding the Fed policy at the moment.
The New York Fed President also said current central bank policies still remain quite accommodative, or supportive of the economic expansion. He suggested base interest rates should move closer to the so-called ‘neutral rate’ — or the level, where Fed rates neither spur nor stifle the GDP growth.
The neutral rate is currently estimated as standing somewhere within the 2.50-3.50-per cent range.
“Rates are still very low. We’ve raised them but they are still at a very low level,” Williams said. “We want to keep this expansion going as long as possible”.
Meanwhile, Fed Chair Jerome Powell suggested in a separate statement that global economic expansion is ‘gradually chipping away’, and international headwinds play a serious role in the Fed’s policymaking.
Fed Vice Chair Richard Clarida also said international developments matter — and are, in fact, monitored by the Fed, in case such headwinds have a potential to affect the American economy.
However, Williams reiterated, a solid US labour market — where the unemployment rate stands at 3.7 per cent, its lowest since the 1960s — along with the GDP growth rate outpacing earlier projections this year, suggest the US economy is poised to gain momentum well into the next year as well.
But Williams also acknowledged the US economy is facing tremendous domestic problems that have been neglected for years, if not decades. He pointed to the uneven redistribution of wealth in the form of insufficient public services.
“This is an economy that has lots of unmet needs in the healthcare and education sectors,” Williams said.
Nonetheless, the New York Fed President expressed an overall optimistic view of the future of US economy. He reaffirmed the view of cyclical dynamics in the economic development of any country, including the US — suggesting sooner or later, a new recession will come and eventually go. He reiterated the need for prudent central bank and Treasury policies to navigate the US economy through times of uncertainty.
“The economy goes up and down, that’s just a way of life,” Williams said. “Right now it is good”.
The remarks from Williams, as well as Powell and Clarida, suggest the Fed will only delay future rate hikes in case global economic uncertainty overshadows positive developments in the US. However, as of now, the central bankers appear to believe the American economy is strong enough to withstand any headwinds from overseas.
Sourse: sputniknews.com
