Washington: A senior official of the American federal reserve warned that the unpredictable pricing policies of US President Donald Trump feed the increase in inflation and the slowdown in economic growth.
The deployment of the American president’s judgment rate has shaken the global markets and has worked consumer confidence, although it has not yet been translated as higher prices for consumers.
“Compared to the beginning of this year … It seems that we have seen a marked increase in rising risks of inflation as well as high risks to the decline in employment and growth prospects,” Kansas City, Jeff Schmid, told an event in the city.
“Based on what I have heard from our commercial contacts, there is an increasing possibility that to establish policy, the Fed will have to balance the risks of inflation against growth and employment problems,” he said.
“By contemplating this balance, I intend to keep my eye focused on the prospects of inflation,” added Schmid, who is a voting member of the Fed rate adjustment committee this year.
Schmid also warned of the potential that prices have a lasting impact on inflation.
“While in theory, prices can only have temporary effects on inflation … I would hesitate to take too much comfort of theory in this environment,” he said.
“I am not willing to take risks when it comes to maintaining the credibility of the Fed on inflation,” he added.
The financial markets see a probability of around 80% that the Fed will not make any change at its interest rate next month, holding it between 4.25% and 4.50%, according to data from the CME group.
“Convincing” signal required
Speaking later Thursday, the president of Boston Fed, Susan Collins, said that it was possible that underlying inflation could increase “well above” by 3.0% this year due to prices, adding that it seemed appropriate to maintain the interest rates unchanged at the moment.
“Given the likely evolution of inflation and actual activity and related risks, the policy could face stimulating compromises,” she said at a conference in Washington, according to prepared remarks.
“It could always be appropriate to reduce the rate of federal funds later this year,” said Collins, who is also a voting member of the Fed rate adjustment committee this year.
“But the prices renewed pressures could delay the standardization of additional policies, because confidence is necessary for the prices to destabilize the expectations of inflation.”
“With high inflation, the signal should be forced to take preventive measures against the risk that activity is more than expected,” she added.