Threats to US economic growth are rising, one of the country’s interest rate-setters has said, and could mean rates will rise a slower pace this year.
“Stock markets in much of the world began the year on a decidedly weak note, with declines in the Chinese stock market generating particular attention. These declines have been accompanied by weak oil and commodity prices, furthering the concern that global growth has slowed significantly,” said Eric Rosengren, president of the Boston branch of the US Federal Reserve.
“Estimates of growth for fourth quarter real GDP in the United States have been falling, raising the possibility that domestic growth could be slowing.”
Rosengren, who is viewed as one of the more dovish on the committee, added:
While monetary policy should not overreact to short-term, temporary fluctuations in financial markets, policy makers should take seriously the potential downside risks to their economic forecasts and manage those risks as we think about the appropriate path for monetary policy.
These downside risks reflect continued headwinds from weakness within countries that represent many of our major trading partners, and only limited data to support the projected path of inflation.
The Federal Reserve rose interest rates for the first time in nearly decade last month. Its target range for the fed funds rate, an interest rate at which banks lend reserves to each other, is between 0.25 and 0.5 per cent.