Fed policymakers are considering a US rate hike, if any, as growth slows

BIRMINGHAM, Ala./SAN FRANCISCO (Reuters) – When the Federal Reserve last month adopted a new "patient" approach to monetary policy, it gave no clear indication as to the duration of its pause or to the number of additional increases in interest rates. where appropriate, were in sight.

This week, as disappointing US retail and industrial production numbers signaled a slower US economy than expected, three Fed policymakers responded: a rate hike, even none.

It is unclear to what extent these views are shared by the 17 decision makers of the Fed. Several other policymakers who spoke this week made sure not to say how long they waited for their own patience with rates. The first reading of their views will take place in March, when the Fed will release its forecasts on the economy and rates.

But the forecasts presented this week – for a rate hike this year by Raphael Bostic, chairman of the Federal Reserve of Atlanta, and Patrick Harker, chairman of the Philadelphia Fed, were issued. Mary Daly, president of the San Francisco Fed – suggests that many of the US central bank do not see the need to curb the economy for some time yet.

If this view is widely shared, the Fed's March forecast could point to a suddenly flatter interest rate trajectory that better fits its new "patient" policy. In December, when the Fed raised its interest rates a fourth time that year, most Fed policymakers announced two more rate hikes this year.

"If the economy evolves as I just said, I'm expecting – a growth of 2%, an inflation of 1.9%, no sense that the pressures on prices are increasing, no sense that we have an acceleration – so I think the case of a rate hike is not there "this year, Daly told The Wall Street Journal in an interview.

Although an increase in rates could, she says, be appropriate if the economy or inflation increased unexpectedly, "I went from a figure to a very patient behavior. "rates," she said.

Bostic, for his part, reiterated on Friday that he was in no hurry to raise his rates. So far, "our outlook for 2019 is still above the trend", around 2.3% to 2.5%, less than last year, but still above his vision of the potential under of the economy.

Fed officials have been saying for some time that economic growth in 2019 will be lower than in 2018, supported by public spending and tax cuts, whose impact the central bank should mitigate.

But in recent months, slower-than-expected growth in foreign markets and turmoil in the US financial markets have shown how fast and deep the downturn could be, which can affect consumer sentiment. spend rent.

Fed Governor Lael Brainard said on Thursday that these "downside" risks were increasing, and said she was comfortable waiting to see how they would play before change rate policy.

The publication of a low retail sales report for the month of December this week was followed by a report stating that manufacturing output recorded its largest decline in eight months in January.

Bostic said that it has not yet changed its outlook, nor its expectations that the Fed should probably raise its rates once this year.

"I do not think this represents a fundamental shift in my vision of the economy," Bostic said at a conference on workforce development, but whether the weakness of the Retail trade persists, "we have to take it into account" in economic forecasts.