A Federal Reserve / FED policymaker said Wednesday that the next few weeks will be crucial to show whether there is sufficient reason to cut interest rates to cope with weak inflationary pressures and uncertainty in U.S. trade policy.
At an event in New York, San Francisco Federal Reserve President Daley said uncertainty about whether a trade agreement between the United States and China would be reached could slow U.S. economic growth. In addition, U.S. inflation has not been able to meet the 2% target set by the Federal Reserve, which could reinforce the rationale for interest rate cuts.
"It's a challenging time," Daley said. "Risk management cannot be slackened," she added.
Daley currently has no voting rights on the Federal Reserve's Policy-making Committee, but is involved in decision-making discussions. Her open attitude to the interest rate cuts shows how much the developments of the past few weeks have shaken policy makers'positions, as the Federal Reserve raised interest rates in December last year.
Federal Reserve Chairman Powell said Tuesday that he and his colleagues are "wrestling" with the question of whether the current risks facing the economy justify interest rate cuts. The Fed is now widely expected to cut interest rates, and US President Trump is also demanding a cut.
The Federal Open Market Committee (FOMC) will hold its next policy meeting from July 30 to 31. Until then, policymakers will pay close attention to U.S. economic growth and employment data. In addition, the G20 summit will be held in Osaka, Japan, this weekend, when Trump will hold one-to-one meetings with at least eight leaders, including Chinese President Xi Jinping. The differences between China and the United States have led to tit-for-tat tariffs. Leaders of the two countries have been divided on how to solve these problems.
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