For U.S. Fed, 'material reassessment' may be in eye of beholder via hpschneider
WASHINGTON - At a glance, the Federal Reserve has set a high bar for any change in interest rates this year: A “material reassessment” of the economic outlook would be required as set forth by U.S. central bank chief Jerome Powell.
Obvious shocks will matter, and the sharp shift in markets following a coronavirus outbreak in China shows just how fast unexpected events can start to reshape the outlook. Major stock indexes were down sharply on Monday, oil prices and the U.S. dollar rose, and economic analysts saw a potential hit to Chinese and possibly global economic growth as the death toll from the virus rose and a major Chinese city was quarantined.
Not so fast, says Cleveland Fed President Loretta Mester. “I would not at this point want to take deliberate action just to try to get inflation back up,” she said in a recent interview. “I do think our communications could be crisper,” she said earlier this month in reference to what “material reassessment” means. “We use words like that, and they are open to interpretation.”Both “material reassessment” and the need for “persistent” higher inflation were introduced as rate change benchmarks through a less formal channel. Rather than appearing in the Fed’s official statement after each policy meeting, they came from Powell himself in press conferences in October and December.
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