Kansas City Federal Reserve President Esther George says she sees no need to lower interest rates to spur the economy. George cast one of two votes against the Federal Reserve’s decision in July to cut the base interest rate from 2.25% to 2%. George tells the St. Joseph Chamber of Commerce Economic Development Summit the Fed decided to lower rates as a precaution.
“That was by design to say, let’s ward off anything bad that may be coming at the U.S. economy. Let’s take out what some people call insurance. Making rates lower will make financial conditions easier, make it easier for businesses and consumers to borrow and maybe we can sustain growth that way,” according to George. “I was one of two people that disagreed with that decision.”
This year, George serves as a voting member of the Federal Open Market Committee, which sets interest rates, among other duties.
George says she understands other members of the committee see risks ahead in the economy. She sees them, too.
“But for the point and time that that decision was being made, I did not think it was necessary to pull the trigger right then,” George tells those attending the summit on the Missouri Western State University campus. “It was my preference to leave rates where they were and to wait and see how some of these issues play out for the long term.”
George says while the United States economy remains strong, mainly because consumers remain confident and continue to spend, there are some worries on the horizon. Economies in other countries, primarily in Europe, have weakened. Great Britain’s exit out of the European Union has been anything but smooth. President Donald Trump’s various trade disputes, especially with China, have disrupted trading patterns for business and agriculture.
George says businesses have told her lowering interest rates doesn’t resolve the uncertainty in the direction of the economy.
“And so, as a policy maker, you’re always judging what are the effects? Because, I just have one instrument to use,” George says. “I don’t have a lot of levers. It’s the interest rate tool is all I have and if lowering that does not ultimately resolve the issues, my own sense was we should wait and see how things play out.”
The Federal Open Market Committee meets again in September.
By Brent Martin of Missourinet affiliate KFEQ in St. Joseph