Fed Reserve Governer says economy will slow but rate cuts not needed.

November 16, 2007 - Forex Economic News

In a speech titled "Risk Management and the Economic Outlook", Federal Reserve Bank Governor Randall S. Kroszner gave his opinion that the Federal Reserve may not need to cut interest rates further despite a prediction that "the economy will probably go through a rough patch during which a number of economic data releases may be downbeat." Kroszner forecasted similar economic sentiments as Fed Chairman Ben Bernanke(recent remarks) about the economy being "poised to grow for a while at a noticeably slower pace" but in the context of an unchanged rate as "the current stance of monetary policy should help the economy get through the rough patch during the next year, with growth then likely to return to its longer-run sustainable rate." Kroszner believes that the near term slow down and gloomy economic data releases would not "suggest to me that the current stance of monetary policy is inappropriate." This latest news out of the Fed policy makers contradicts a popular view that the Fed will keep cutting interest rates.

Inflationary Risks.

Gov. Kroszner said looking forward that cutting rates would "lower the incremental benefits" to the economy that the previous rate cuts in September and October provided. Further rate cuts could have inflationary risks because "the downside risks to economic growth now appear to be roughly balanced by the upside risks to inflation." Kroszner's speech also expands on risk management in Fed policy, the mortgage crisis and on more Fed communications. Read it here.

Tags: Bernanke, Interest Rates, US Economy, Kroszner, Fed- - - - -Blog index