Fed Policymakers Signal Rate Cuts Ahead Amid Economic Concerns
By Lindsay Dunsmuir and Ann Saphir
Aug 5 (Reuters) – U.S. central bank officials pushed back on fears that the weak July jobs report points to a recession, but hinted at upcoming rate cuts to steer clear of such an outcome. San Francisco Fed President Mary Daly emphasized confidence that the economy is slowing but not collapsing, noting the Fed’s openness to adjusting rates in upcoming meetings based on incoming data.
A steep decline in U.S. stocks highlighted worries that the Fed might have delayed rate cuts too long. Interest-rate futures suggested expectations of a significant 50-basis-point reduction next month. Chicago Fed President Austan Goolsbee, however, attributed some market volatility to global factors, including a rate hike by the Bank of Japan and geopolitical tensions.
Despite the market’s unpredictability, Goolsbee acknowledged the need for the Fed to remain vigilant to economic shifts indicated by market movements and recent weak job numbers. He stressed the importance of a forward-looking approach to economic decisions.
New data shows a recovery in the U.S. services sector, reinforcing an economy "in transition," according to Matthew Martin of Oxford Economics. The Fed’s recent decision to hold rates steady in the 5.25%-5.50% range came amid rising unemployment claims and a slight uptick in the unemployment rate to 4.3%, casting doubt on Fed Chair Jerome Powell’s assertions of a gradually normalizing labor market.
Economists focused on Powell’s commitment to respond to unexpected labor market declines. Goolsbee hinted all options, including emergency rate cuts, remain on the table but have not yet signaled such a response.
Daly noted last week’s shift in Fed communications to emphasize its full employment mandate, which has already influenced market borrowing costs. "The communication itself is a policy adjustment," she said.
(Reporting by Lindsay Dunsmuir and Dan Burns; Editing by Toby Chopra, Andrea Ricci, Jonathan Oatis, and Paul Simao)
Original Story https://www.livemint.com/news/fed-policymakers-signal-rate-cuts-ahead-but-not-recession-11722900970706.html
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