Maybe A Fed Rate Cut Is Coming

Policy makers have left the funds rate unchanged recently, largely because even as they worry about growth, price pressures have remained above their comfort level. But with growth prospects dimming and oil prices falling, there’s some reason for optimism on at least one front.

“I feel better about inflation,” Lockhart said. “The weaker economy combined with lower oil and commodity prices would serve to suppress inflationary pressures, especially ‘headline’ or overall inflation,” he said, adding “the outlook for inflation may have improved.”

The central banker devoted considerable attention to developments in financial markets. He described credit markets as “quite strained” and said “there has been a widespread withdrawal of confidence” between financial-market participants.

While the troubles in the financial system have been around for some time, ” the situation in September has been one of accelerating deterioration of the institutional and market landscape of our financial system,” Lockhart said. He added “these conditions are still with us and, as of yesterday, show no signs of relenting.”

Posted in Categories: Contributor, Economy, External Research.

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