As reported by Reuters, differences over Fed policy could come to a head within the US Fed’s governing board.
Key quotes
“The fault lines are technical as well as philosophical and include a debate over whether the economy has shifted into a higher gear, giving the Fed room for more interest-rate hikes and perhaps reducing the need for controversial tools like bond-buying to fight future recessions.
San Francisco Fed President John Williams launched a critical salvo in the debate on Tuesday with a speech underscoring his view that the Fed has only a few more rate hikes ahead of it before rates reach a level of borrowing costs that allows the economy to coast along, without stimulating or slowing its progress.
His view contrasts with recent optimism from some economists and central bankers. Among them is the Fed vice chair for financial supervision, Randal Quarles, a Trump administration appointee who in February said he believed there is a “real possibility” that the economy could shift to a higher growth trajectory.
Quarles’ view suggests that the Fed has a bit more room to raise rates without braking the economy, which would in turn give it the flexibility to cut rates more deeply in the next downturn.
Fed Board nominee Richard Clarida, at his confirmation hearing on Tuesday, flagged some discomfort with such measures, which began in the depths of the financial crisis to stabilize banks and were later were expanded to help bring down high unemployment and lift excessively low inflation.”
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