Fed all for cutting rates ‘aggressively’ when downturn looms

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Jun 03, 2019 06:00 am

NEW YORK US policymakers have to cut rates "aggressively when deflation or a severe downturn threatens", a top Federal Reserve policymaker said on Friday in remarks that did not directly address his current economic outlook.

New York Fed president John Williams told an academic research conference that cutting rates aggressively and keeping them lower for longer in recoveries are both lessons he draws from research on how to respond to economies.

Research on those questions "had important practical lessons for policymakers... following the global financial crisis," Mr Williams said.

"One lesson was that short-term rates should be cut aggressively when deflation or a severe downturn threatens. That is, do not 'keep your powder dry'. A second lesson was that short-term rates should be kept 'lower for longer' as the economy recovers."

Mr Williams said last week that he sees US interest rates as being in the right place given a strong economy and "essentially non-existent" inflation pressures.

He added that there was not currently a strong argument for changing rates, including as a response to low inflation readings that may due to temporary factors. - REUTERS