Eric Rosengren, Federal Reserve Bank of Boston says that three interest rate cuts this year are a cause of concern.
He states that the global economy has seen a rapid slowdown that has brought down growth in the U.S. too. The trade dispute between the U.S. and China has hurt growth and has distorted the financial markets, he claims.
Interest rate cuts have been brought to preserve expansion in the economy. Rates should not be cut to bring in higher inflation. Inflation is a bit lower than 2 percent but will recover soon, he says.
Unemployment is at a 50-year low which will bring in consumer spending. As this accounts for almost 70 percent of the U.S. economy, it reflects that the economy is quite healthy.
Though tariffs from China have hurt the economy and volatility is high, the economy is not in a bad place, he adds.
However, the rate cuts are a cause of concern. The central bank needs to bring in rate cuts only during a serious slowdown. The current rate cuts will leave less room for cuts when situations arise.
He further states that negative interest rates will not do well for the economy, even in the case of a recession. They have not been effective to fight low growth in both Japan and Europe, where it is already in existence.
President Trump has been lashing out on the Fed to lower interest rates further. He had often cited the negative rates already existing in other economies.
Fed Cleveland Chief Loretta Mester has also voiced her opinion that the Fed should not have lowered interest rates last month. She says that the U.S. is in a good spot and should wait before going for a change in policy.
The Fed Chairman Jerome Powell has mentioned that further changes in interest rate policy will depend on incoming information about the economy.