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On Thursday, Federal Reserve Chairman Powell continued to focus on global risks that could trigger Fed interest rate cuts in the coming weeks, but at the same time, several regional Fed Presidents were more optimistic that the U.S. economy continued to grow and business prospects were sound.
These contrasting statements illustrate the dilemma facing the Federal Reserve before its monetary policy meeting at the end of this month. It is widely expected that the Federal Reserve will cut interest rates at this meeting.
On the one hand, Powell stressed at congressional hearings on Wednesday and Thursday that global trade and economic risks have weakened investment, that inflation is far below the Fed's target of 2%, and that the expansion of the U.S. economy may require a shot in the arm. His views were supported by New York Federal Reserve Bank President Williams and Federal Reserve Governor Brenard.
However, when Atlanta Federal Reserve President Bostek and Richmond Federal Reserve President Barkin surveyed businesses in their respective jurisdictions, they found that the economy was still booming and the Federal Reserve had no clear need to ease monetary policy.
"I haven't seen storm clouds really trigger storms yet," Bostek said. He said he was sceptical about the need for interest rate cuts at the moment. "Businesses almost invariably told me that the economy was as strong as it used to be. They did not see weak consumer spending. Nor will they substantially change their plans.
"I've been out talking to business people for the past few weeks," Balkin said Thursday. "They haven't got any intention of going backwards yet... they haven't laid off jobs, they haven't cut investments already under way. But they're cautious... they didn't stop, they just slowed down."
Next week, when the Federal Reserve releases its latest brown paper, there may be more detailed information about local business confidence. The brown paper collects business information from 12 Federal Reserve jurisdictions.


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