Two Fed officials see no reason to cut rates now; Kaplan & # 39; open minded & # 39; by Reuters

By Trevor Hunnicutt

JACKSON HOLE, Wyo. (Reuters) – Two Federal Reserve officials said Thursday that they did not see the need to cut interest rates next month, while another said it was "open to paying interest." "mind," highlighting the divisions of policymakers on how to respond to signs of a global economic slowdown.

Kansas City Fed President Esther George, who disagreed with the US central bank's decision to cut rates last month, and Philadelphia Fed President Patrick Harker, who said he supports it. reluctantly, "said that the US economy did not need more stimulus.

The reduction in July 31 loan costs, the Fed's first in more than a decade, has reduced its main overnight lending rate to a target range of 2.00% to 2.25%. Investors are generally expecting a further rate cut at the Fed's monetary policy meeting on 17 and 18 September.

"I would be happy to leave the rates here absent, with either a weakness or a reinforcement, a kind of positive risk that would make me think that rates should be elsewhere," said George in an interview with Bloomberg TV. Harker, meanwhile, told CNBC in a separate interview "we should stay here for a while and see how things are going".

Sending to CNBC later in the day, Robert Kaplan, chairman of the Dallas Fed, said the companies he had talked to had become much more cautious given all the surprises on the market. trade policy, even though consumer spending has been high.

"I want to take all the time from here to September to gauge the behavior of the economy and avoid having to take any further action," said Kaplan, who backed the July rate cut. "If I see a continuing weakness, I will at least have the open mind to make adjustments."

Officials made remarks on the sidelines of the Fed's annual Central Bank conference in Jackson Hole, Wyoming, fearing that the longest economic expansion ever in the United States will come to an end due to the trade war between the United States and China, the global slowdown in manufacturing and the possibility. the Fed has set too high rates.

The yields on 2-year Treasuries have briefly exceeded those of 10-year bonds on Thursday, a "reversal of the yield curve" that is perceived by some investors as a sign of a recession that is announcing and that the Fed takes too long to react.

Economic data send contradictory signals.

US manufacturing industries recorded their first month of contraction in nearly a decade in August, the IHS Markit Flash Purchasing Managers & Index revealed on Thursday.

Nevertheless, the US labor market appears to be healthy, a key indicator in a consumer-driven economy. Initial claims for state unemployment benefits fell from 12,000 to 209,000 seasonally adjusted for the week ended Aug. 17, the Department of Labor said in a separate report. The decline was stronger than expected.

In their Thursday talks, George and Harker both described the yield curve as a signal they were looking at, but not as a sign of a clear recession at this point.

"It's a signal among many," said Harker.

Kaplan said the fact that US public debt yields, including 10- and 30-year Treasury bonds, are now above the Fed's benchmark suggests that monetary policy is "a little stricter" than He would have imagined it three months ago.

PRESSED UNDER PRESSURE

President Donald Trump, who has repeatedly accused the Fed of undermining economic growth by keeping rates too high, said on Twitter that the economy "is doing really well," but that the central bank "could easily make it record".

Trump also said that escalating trade conflict with China was needed, despite research suggesting that tariffs and the resulting uncertainty were slowing growth.

The president is not the only one to put pressure on the Fed for it to lower its rates. Markets are betting on lower interest rates next month and any disappointment that could lead to a selloff could weigh more heavily on the economy.

Still, the minutes of the Fed's July 30-31 monetary policy meeting, released on Wednesday, revealed more opposition to the quarter-percentage-point reduction than reflected it. the 8-2 vote of the policy-making committee.

George and Boston Fed President Eric Rosengren were the two panelists who disagreed and wanted to keep the rates unchanged.

However, a "couple" of participants advocated an even deeper cut of half a percentage point to help bring inflation back to the Fed's target and counteract the fallout from global trade tensions, and a larger number – qualified in the minutes of the meeting of "several" – do not change at all.

A number of Fed officials participating in the rate-setting meetings are voting. Cleveland Fed President Loretta Mester told Reuters last week that she also objected to the recent rate cut, but that she was still in the process of deciding to the policy to be recommended later.