By Greg Robb, MarketWatch
Bloomberg News/Landov Enlarge Image
The U.S. economy is clearly facing several challenges, primarily from overseas, but the three interest rate cuts since July should help sustain growth, said New York Fed President John Williams on Tuesday.
“From the domestic point of view, things are strong and continue to be strong, but we’re dealing with various global factors we’re trying to navigate,” Williams said, in a talk at a Sifma conference in Washington.
The U.S. economy is facing headwinds from slower global growth, uncertainty from trade policies and muted inflation pressures, Williams said.
As a result of these global factors, “growth is starting to slow in the U.S.,” Williams said.
The Fed’s three interest rate cuts since July, which brought the Fed’s benchmark rate down to a range of 1.5%-1.75%, were designed with these risks in mind and mean that policy is “well-positioned for a future that is uncertain,” Williams said.
Fed Chairman Jerome Powell has signaled that Fed policy is on hold, absent material developments and Williams said he shared this view.
“The stance of monetary policy seems appropriate” given the baseline outlook for continued moderate growth and a strong labor market, Williams said.
Williams said policy was “not locked in” and would respond to the data going forward.
With continued downgrades occurring to the global economic outlook, the New York Fed president said he was “definitely watching more for some of the downside risks to the outlook.”
Kevin Cummings, senior U.S. economist at NatWest, said Powell’s comments are supportive of no action at the Fed’s next meeting on Dec. 11.
“We believe the Fed will ultimately feel compelled to lower rates further and continue to forecast cuts in March and June, dropping the funds rate to 1%-1.25% by mid-2020,” Cummins said in an email to clients.
Stocks /zigman2/quotes/210598065/realtime DJIA -0.29% opened lower on Tuesday on renewed worries about U.S.-China trade relations.