A further reduction in the policy rate at the December meeting is not a foregone conclusion, said U.S. Federal Reserve Chairperson Jerome Powell, adding that there were strongly differing views within the Committee on about how to proceed in December.
As a result of the ongoing shutdown of the U.S. federal government, certain key data have not been collected. Therefore, the Federal Reserve has been using private data to gauge the conditions of the economy. However, the Fed Chair hinted that any uncertainty and lack of clear data could impact the result of the December meeting.
The Federal Reserve will continue to get insight into the economy through sources outside of government data, but any great amount of uncertainty could affect what happens at the December meeting, Powell said.
"We get some data in inflation, some data in economic activity. We’ll have a picture of what’s going on, ... [but] we’re not going to be able to have the the detailed feel of things," he added.
"So in terms of how it might affect December, we just don’t know what we’re going to get. What do you do if you're driving in the fog? You slow down," Powell quipped. "If there is a very high level of uncertainty, then that could be an argument in favor of caution about moving. But we’ll have to see how it unfolds.”
While the second-longest federal government shutdown may lift, and the Federal Reserve may get access to key data, there's a possibility that it would make sense to be more cautious about moving. "I'm not committing to that. I'm just saying it's certainly a possibility," Powell added.
The U.S. Federal Reserve trimmed the benchmark lending rate by 25 basis points on October 29, in a widely expected move. The overnight lending rate is now in a range between 3.75 percent to 4 percent.
Available indicators suggest that economic activity has been expanding at a moderate pace. "Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated," said the central bank.
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