US Fed’s Brainard predicts low interest rates in near future

Washington (Feb 27)  Financial and economic shocks from abroad could lead the Federal Reserve to keep U.S. interest rates lower than many observers expect, according to a Fed policymaker who also issued a call for more global coordination by central banks and governments.

The comments by Fed Gov. Lael Brainard on Friday solidify her role as a leader among U.S. central bankers who are wary about further interest rate hikes given their concerns over a slumping global economy.

Speaking to a monetary policy conference in New York, she said underlying weakness in America’s economy and “heightened spillovers” from abroad “could result in a lower policy path in the United States relative to what many had predicted.”

Her comments came as senior Group of 20 officials met in Shanghai to discuss falling equity markets, volatile currencies and signs of economic weakness throughout the world.

A day earlier, the International Monetary Fund called on the G-20 to plan for a coordinated stimulus program to keep a slowing global economy from stalling.

Brainard said there was “scope for monetary policy to be more effective with fiscal policy working in the same direction.”

“A joint determination by policymakers across major economies to better deploy policy tools to provide support for global demand could be beneficial,” Brainard said.

Brainard did not comment on whether the Fed should raise interest rates at its next meeting March 15-16. But she said there was evidence of weakness in the U.S. job market and that the Fed should be wary of betting that a tighter labor market will fuel inflation as much as it has in the past.

Source: TheJapanNews