USA official warns of recession risk if interest rates go much higher

Galtero Lara
Enero 11, 2019

Investors will be looking for new clues on USA interest rate policy when Federal Reserve Chairman Jerome Powell speaks before the Economic Club of Washington on Thursday afternoon.

"We've got a good level of the policy rate today" and there's no urgent need to go higher, James Bullard, a voting member this year on the Federal Open Market Committee, said in an interview with the Wall Street Journal published Wednesday.

The Federal Reserve is one of the most important institutions in global finance because it influences the cost of debt worldwide by raising or lowering its base interest rate.

After four rate hikes past year, the Fed would be "bordering on going too far and possibly tipping the economy into recession" if rates go higher, Bullard said, adding that he would be willing to cut interest rates if needed.

Bullard has been arguing, mostly unsuccessfully, for the Fed to hold off on rate increases because inflation isn't posing a risk of accelerating much beyond officials' 2 percent target.

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The Fed raised the benchmark interest rates in December for the fourth time previous year but the minutes said "a few" participants favored holding off, saying there was "latitude to wait and see".

Speaking to an audience in Washington, D.C, Powell delivered the same reassuring message that bolstered markets last Friday.

US and global stock markets retreated sharply in the closing weeks of 2018 amid the US-China trade confrontation and fears rising interest rates could slow the economy.

And while President Donald Trump has been criticized for his unprecedented public complaints about Fed policy, Bullard also called out former Fed chairs Janet Yellen and Ben Bernanke for their comments on policy, saying they were "interfering" in the process.

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