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 move forward, we can go down," Bostic said in a statement prepared for a monetary policy conference at the San Francisco Fed.

The comments were Bostic's first since the Fed made an unexpected shift on Wednesday. Eleven of its 17 policymakers are not predicting any rate hikes this year, and Fed Chairman Jerome Powell spoke of low inflation, the slowdown in the 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" sign that the central bank will keep its rates unchanged for the rest of the year, Bostic said, adding that patience did not limit the options of the Fed. the Fed.

"I am open to all possibilities because we want to support a sustained economic expansion, favorable conditions in the labor market and inflation close to the symmetrical 2% target 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 worries more and more about achieving its 2% inflation target and fears that tax cuts and deregulation of the Trump administration will not release economic growth faster.

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 spread between the 3-month T-bill and the 10-year note yield has fallen below zero for the first time since 2007, after the US manufacturing data was not estimated.

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

(Report by Ann Saphir, edited by Leslie Adler)