In an interview with FOX Business Network’s Peter Barnes, Kansas City Federal Reserve President Esther George discussed how China and market volatility are affecting her outlook on raising rates in September.
“Anytime that you get new information in between meetings, it can complicate decision making. So certainly you have to look at the changes, the volatility we saw in the market, what new information we may have about China and take that in. The question is whether it fundamentally changes the outlook of the U.S. economy,” she said.
George said she has a wait-and-see approach on data before suggesting a rate hike.
“Given what we’ve seen recently, I think we just have to wait and see. I don’t want to take too much signal from something that could turn out to be noise. I don’t want to overreact to short-term data that may not in the long term really turn out to be significant for that kind of a decision,” she said.
She also said the U.S. economy is getting back on track after a slow start to the year.
“So after a disappointing first quarter, it looks like we’re back on track. We’ll probably do another two percent growth. The labor markets continue to show great health, I think. We’ve had over 200,000 jobs per month for 15 of the last 17 months. That is great sign, I think. And so as consumers spend, as they gain more confidence, as low oil prices seed through to them, my outlook is for continued growth. And I think in that context, it’s time for us to talk about normalization,” she said.
George also said continuous low rates can create instability in the markets.
“Well, when rates are this low for a long period of time, you create certain incentive. And there can be mispricing of risk. There is certainly a desire to reach for yield. And if you think about the kind of accommodation, the quantitative easing was focused on asset values at the time. And so as we’ve seen housing values recover and the stock market that has grown, once you begin to talk about raising rates, you might expect volatility at some time,” she said.