Jerome Powell indicates the American Federal Reserve to move slowly with interest rates

Washington -Federal Reserve chairman Jerome Powell indicated on Tuesday a cautious approach to future interest rates, in stark contrast to other FED officials who have called for a more urgent approach.

In comments in Providence, Rhode Island, Powell noted that there are risks for both the goals of the FED to find maximum employment and stable prices. But with the rising of unemployment, he noticed, the Fed agreed to lower its most important rate last week. Yet he did not signal any further cuts on the horizon.

If the Fed would lower the rates “too aggressively”, Powell said, “we cannot finish the inflation track and later reverse the course” and raise the rates. But if the Fed keeps its rate too high, “the labor market can unnecessarily mitigate,” he added.

Powell’s comments repeated the caution he expressed during a press conference last week, after the FED had announced its first rate reduction this year. At that moment he said, “It’s a challenge to know what to do.”

His approach is in stark contrast to some members of the Fed rate committee who insist on faster cuts. On Monday, Stephen Miran, who has appointed President Donald Trump to the FED board, said that the FED should quickly lower its rate to 2%to 2.5%, of the current level of around 4.1%. Miran is also a top advisor in the Trump government and expects to return to the White House after his term ends in January, although Trump could appoint him a longer term.

And earlier Tuesday Fed Gouverneur Michelle Bowman also said that the central bank should cut faster. Bowman, who was appointed by Trump in his first term, said that inflation seems to cool while the labor market is stumbling, a combination that would support lower rates. When the FED lowers its most important rate, it often lowers other loan costs for things such as mortgages, car loans and business loans over time. “It is time for the (FED) to act decisively and proactively to tackle decreasing dynamics from the labor market and emerging signs of vulnerability,” Bowman said in a speech in Asheville, North Carolina. “We run a serious risk that we are already behind the curve when tackling deteriorating labor market conditions. If these conditions continue, I am afraid that we will have to adjust the policy faster and to a greater extent.”

Yet Powell’s comments showed few signs of such urgency. Other FED officials have also offered caution about reducing the rates too quickly, which reflects the floor of the rate-fixing committee.

On Tuesday, Austan Goolsbee, president of the Chicago Branch of the Federal Reserve, said in an interview on CNBC that the FED should move slowly, since inflation is above the 2% target.

“Because inflation has been over the goal for 4 1/2 years in a row, and I think we should be a bit careful with the exaggerated aggressive of the front,” he said.

Last week the Fed this year reduced its most important rate this year to around 4.1%, a decrease of around 4.3%, and policy makers indicated that they would probably lower the speeds twice as much. FED officials said in a statement that their concern about slower recruitment had risen, although they noticed that inflation is still above their target of 2%.