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US Fed hints at further interest rate cuts

UNITED STATES, WASHINGTON (OBSERVATORY) — The US Federal Reserve System (FRS) constantly states that it will act “appropriately” to maintain economic growth, hinting at a likely reduction in interest rates and not pushing itself into a specific policy direction, writes The Wall Street Journal.

This phrase is most often used by the main managers of the American central bank, such as Fed Chairman Jerome Powell, Vice President Richard Clarida and New York Federal Reserve Bank (FRB) President John Williams, who also serves as Vice Chairman of the Fed Open Market Operations Committee.

Speaking earlier in Switzerland, Powell said the Fed would “act accordingly to maintain economic growth.” He spoke a similar phrase at the Jackson Hole conference in late August and in other speeches of recent months.

Later his example was followed by the head of the Federal Reserve Bank of New York, John Williams, saying: “I carefully monitor this nuanced picture and remain vigilant to act accordingly to maintain economic growth, a strong labor market and a steady return to inflation at 2%.” About the same thing in a television interview in Jackson Hole and in subsequent speeches, Clarida said.

The use of the same terminology by the Fed leadership, as the publication notes, may indicate a coordinated strategy. The same wording was used by the Committee on Open Market Operations, explaining the decrease in interest rates in July by 0.25%.

Statements of intent to “act accordingly” leave the Fed leadership enough room to maneuver when formulating monetary policy in a changing environment. Now these words signal the intention to lower interest rates again, and, most likely, again by a quarter percentage point.

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