In the month since the Federal Reserve raised the benchmark federal funds rate for the fourth and final time in 2018, policymakers at the U.S. central bank have taken a step back, cooling their approach to interest rates in the year ahead.
On the heels of a rocky month for the stock markets -- in December, the New York Stock Exchange and S&P 500 experienced their worst performances since the Great Depression -- and in the midst of concerns over a nearly year-long trade war between the U.S. and China, policymakers have signaled a dovish approach to interest rate hikes in 2019, despite relatively strong economic data.
“Markets are expressing concerns, again about global growth in particular,” Fed Chair Jerome Powell said in early January. “I think that’s becoming the main focus, and trade negotiations, which are related to that. And I’ll just say, we’re listening carefully to that. We’re listening sensitively to the message that markets are sending.”
Powell isn’t alone in preaching patience this year. Here’s a look at other Federal Reserve presidents who have said they favor a slowdown in rate hikes in 2019 -- if not an all-out pause.
Federal Reserve Bank of Dallas President Robert Kaplan:
On Jan. 3, while speaking to Bloomberg, Kaplan pushed for a pause in interest rate hikes in 2019, largely because of uncertainties about global growth and tighter financial conditions.
“We should not take any further action on interest rates until these issues are resolved, for better, for worse,” he said. “So I would be an advocate of taking no action and -- for example -- in the first couple of quarters this year, if you asked me my base case, my base case would be take no action at all.”
Federal Reserve Bank of Cleveland President Loretta Mester:
If inflation stops rising in 2019, policymakers at the U.S. central bank will no longer need to hike short-term interest rates, according to Mester. Mester, who was a voting member of the Federal Open Market Committee in 2018, but will not be in 2019, noted that the U.S. economy is currently in a “really good spot.”
“We’re trying to gear the economy,” she told CNBC two weeks ago. “We don’t want it to have overheat, which ends up with bad outcomes for the public. We know when we went into recession, that wasn’t a good outcome for anyone...And yet, we don’t also want to put the brakes on the economy.”
Federal Reserve Bank of Chicago President Charles Evans:
Last week, Evans cited the lack of evidence of inflation as a reason for the Fed to take its time in setting monetary policy in 2019.
"We have good capacity to wait and carefully take stock of the incoming data and other developments,'' Evans said. He will be a voter on the rate-setting Federal Open Market Committee.
Federal Reserve Bank of Kansas President Esther George:
Like her colleagues, George reiterated during prepared remarks on Tuesday that the Fed likely needs to pause before implementing further rate hikes while it evaluates the economy and the effect of previous rate raises.
"Failure to recognize these lags could lead to an over-tightening of policy, a downturn in economic growth and an undershooting of our inflation objective,” she said.