Fed’s Waller Calls for Careful Cuts, Miran Advocates Bigger Move

(Oct 16): Federal Reserve governor Christopher Waller said officials can keep lowering interest rates in quarter-percentage-point increments to support a faltering labour market, while Stephen Miran continued to advocate a larger reduction.

“You don’t want to make a mistake, so the way to avoid that is to go cautiously or carefully and do 25, wait and see what happens, and then you can get a better idea of what to do,” Waller said Thursday during an interview on Bloomberg Television.

Fed chair Jerome Powell signalled earlier this week that officials are on track to lower borrowing costs by a quarter point when they meet at the end of this month. It would be the second rate reduction of the year as officials react to a sharp slowdown in job growth. However, several policymakers have emphasised the need to remain on guard against inflation, which is still running above the Fed’s 2% target.

In a separate interview Thursday on Fox Business, Miran reiterated his call for a larger, half-point cut. Miran is on temporary leave from his post as chair of the White House Council of Economic Advisers, in a governor position at the Fed which expires in January.

Miran repeated his view that a recent flare-up in US-China trade tensions creates more downside risk for the economy and calls for rapid monetary policy easing.

“If monetary policy stays as restrictive as it is, and you have a shock like this hit the economy, it does materially increase the negative consequences of that shock,” he said, adding that he would favor a half-point cut when officials meet Oct 28-29. But he conceded officials are likely to lower rates by a quarter point, as they did in September.

“I think that we are probably set up for three 25-basis-point cuts this year,” Miran said.

Source: Theedgemarkets