Fed's George : It's 'Appropriate' to Hold Rates Steady for Now

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01/14/2020 | 07:34 pm

By Michael S. Derby

Kansas City Fed leader Esther George said Tuesday that while she opposed all three of last year's rate cuts, she is OK with holding monetary policy steady for now.

"Keeping rates on hold for now is appropriate in my view as we assess the economy's response to last year's rate cuts and monitor incoming data," Ms. George said in the text of a speech to be presented in Kansas City, Mo.

Ms. George joined with Boston Fed leader Eric Rosengren last year and argued that the Fed should only lower rates when confronted with an actual weakening in the data. While the two spoke for a broader block of officials without voting roles on the rate-setting Federal Open Market Committee, the majority wanted to lower rates to offset risks posed by slower global growth and trade tensions.

Ms. George won't have a vote on this year's FOMC due to the annual rotation of regional Fed leaders. The Fed signaled in December that it doesn't expect to change rates this year. Officials who have spoken over recent days have reiterated they see no imminent need to change rates, to either higher or lower levels.

Ms. George has an upbeat view on the economy for 2020.

"I continue to see the expansion supported by solid growth in consumer spending, with continued weakness in manufacturing and business spending, " she said. She added that she expects overall growth to moderate to the longer-term trend of around 1 3/4 % to 2%, with the jobless rate staying at around 3.5%. Ms. George also expects "benign" inflation readings.

Ms. George says it will be key to understand whether the 2019 rates were needed and if they "will need to be reversed if headwinds fade."

The cuts may have also moved rate policy to a more neutral level, she said. The official added it could also be the case "that downside risks and uncertainties persist in a way that keeps investment spending weak and spills over to the consumer, altering the modal outlook and requiring further policy easing."

Write to Michael S. Derby at michael.derby@wsj.com

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