Leading Fed hawk Esther George urges peers to be patient on rates

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FEDERAL RESERVE Bank of Kansas City President Esther George, who has been one of the most hawkish members of the central bank’s policy group, urged her peers to be patient and pause before considering additional rate increases.

“I am mindful that the effects of past policy actions have not yet fully played out, calling for patience in considering our policy actions,’’ George said Tuesday in a speech in Kansas City, Missouri. “A pause in the normalization process would give us time to assess if the economy is responding as expected with a slowing of growth to a pace that is sustainable.’’

George’s remarks, contrasting with her calls for more tightening over the past seven years, suggest Fed Chairman Jerome Powell is likely to win easy support in his call for caution in raising rates. George votes on monetary policy in 2019.

While the Federal Open Market Committee in December penciled in two rate hikes for this year, Powell and other Fed leaders have since stressed there’s no hurry to move in light of volatile markets, low inflation and slowing global growth.

Speaking at an event in Plano, Texas on Tuesday, Dallas Fed President Robert Kaplan also signaled he would remain pat on rates. He spoke after Minneapolis Fed chief Neel Kashkari — who has argued against interest-rate increases for much of his tenure — said there’s no reason to tighten monetary policy now.


“Inflation has been muted — surprisingly muted — and I expect that to continue,” according to Kaplan, who next votes on monetary policy in 2020. “The wise move here is to be patient.”

Kaplan cited three big uncertainties: slower global growth, weakness in some US industries and a tightening of financial conditions. He characterized the pause lasting a quarter or two rather than weeks.

“We’re in an uncertain time,” and “we’re going to have to see how this economy unfolds,” Kaplan said.

The Fed raised borrowing costs four times last year and rates seem to be approaching a point near neutral, which neither stimulates nor restrains the economy, George said. Because hiking has a delayed impact on the economy, “failure to recognize these lags could lead to an overtightening of policy, a downturn in economic growth and an undershooting of our inflation objective,’’ she said.

“It is possible that some additional rate increases will be appropriate,’’ she said. “But making that judgment is not urgent and should depend on a careful look at the data and gathering additional insight into where our destination is, how much further we need to go to reach it and how quickly we should get there.’’ — Bloomberg