Fed could raise rates, or reduce rates, says Bostic

SAN FRANCISCO (Reuters) – The Federal Reserve's slow approach to monetary policy does not mean that the US central bank will not raise interest rates, or lower interest rates as needed. said Atlanta Federal Reserve Chairman Raphael Bostic on Friday.

"We can ride. we can back down, "Bostic said in a statement prepared for a monetary policy conference at the San Francisco Fed.

These comments were the first for Bostic since the Fed made an unexpected change on Wednesday. Eleven of its 17 policymakers are not predicting any rate hikes this year, and Fed Chairman Jerome Powell has spoken of low inflation, a slowing global economy, and risks such as US trade tensions. with China, to remain patient "for a while".

After the Wednesday announcement, the financial markets, which had already considered any possibility of rate hikes this year, have begun to anticipate a rate cut next year.

But it is inaccurate to see in recent Fed statements a "definitive signal" that the central bank will keep rates unchanged for the rest of the year, Bostic said, adding that patience does not limit options. from the Fed.

"I am open to all possibilities because we want to support sustained economic expansion, favorable labor market conditions and inflation close to the symmetrical target of 2% of the committee," said Bostic, referring to the Federal Open Market Committee. "Markets should understand this, so I hope I have clearly stated my position."

In February, Bostic said he expected the Fed to raise interest rates once this year, after raising rates four times in 2018. He did not say number of rate increases that he now deems appropriate.

The Fed is increasingly worried about achieving its 2% inflation target and fears that the Trump administration's tax cuts and deregulation will release faster economic growth.

The same goes for the financial markets.

Data released earlier Friday showed that manufacturing activity in the United States unexpectedly slowed in March, a worrisome sign of the US economic outlook, which helped to reduce borrowing costs in the long run. term below short-term costs, an indication of short-term risk and seen by many as a potential. announcer of the recession.

The gap between 3-month US3MT = RR and 10-year US10YT = RR bond yields has fallen below zero for the first time since 2007 after manufacturing data in the US was not estimated.

Earlier Friday, data from Germany showed that the factories sector continued to contract, another worrying sign for the global economy.