Federal Reserve's Mester: US is likely to avoid a serious downturn


Federal Reserve's Mester has said that the US is likely to avoid a serious downturn.

More from Mester:

  • Economy 'continues to perform well'.
  • Disagreed with september rate cut.
  • Content to keep 'shallow' policy path for now in hopes of firmer inflation.
  • Easy to envision outcome where weak business investment leads to weaker hiring and household spending.
  • 'On balance' feels trend growth will continue.

Comments from earlier the week and September

  • Monetary policy has been more accommodative than compared with the past.
  • Running an economy ‘that’s too hot’ sometimes has unintended policy consequences.
  • Stability of inflation expectations is key to monetary policy.
  • Band on inflation target makes sense for communication.
  • Policy to be recalibrated if necessary.
  • Fed will not overreact if inflation goes ‘a little’ above target.
  • ‘Reasonably close’ to 2% inflation target.
  • US economy is doing pretty well overall.
  • Trade tariffs are a headwind that must be taken seriously.
  • Knew there would be a slowdown in 2019, question is if the slowdown is more than expected.
  • Important to look at incoming information before meeting.

FX implications: 

Speculators are pricing in a rate cut from the Fed for later this month. However, the concentration has been elsewhere this week with the seesaw trade talk headlines, conflicting from start to finish ahda of tomorrow's key meting between Trump and high-level negotiators at the White House. 

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