Federal Reserve officials are sticking with their pledge for patience on interest rates, shrugging off President Donald Trump’s escalating trade war and his pressure for a cut.
New York Fed President John Williams and his Kansas City colleague Esther George, who vote on policy this year, acknowledged that new tariffs on Chinese imports could affect the outlook for US inflation and growth. But both saw no need for the central bank to react.
“Policy is in the right place,” Williams said in a Bloomberg Television interview in Zurich. “I don’t see any reason to have a bias up or downward in the current circumstances. We’re going to evaluate, assess, to see the best decision to get us to our goals.”
Fed officials held rates steady at their April 30-May 1 meeting and said they will be “patient” on judging the next move in policy after previously signaling they saw no need for a move all year.
“This wait-and-see approach is appropriate because we have not seen upward pressures building on inflation, even though we have experienced above trend growth and a further tightening of labor markets,” George told an audience in Minneapolis.
Investors, on the other hand, have increased their bets that the central bank will cut rates this year after China retaliated against Trump’s tariffs and the US warned there was more to come.
George said she wasn’t ignoring the message from markets. “In the context of an economy that is still growing above potential, the labor market that continues to add jobs, a falling unemployment rate, I don’t see an argument right now for a rate cut,” she said.