Faster than expected changes to the federal funds rate could stress the economy and financial markets, with steady and well-communicated increases preferable in the current uncertain environment, Kansas City Fed president Esther George said on Monday.
“This is already a historically swift pace of rate increases for households and businesses to adapt to, and more abrupt changes in interest rates could create strains, either in the economy or financial markets,” said George, who dissented against the Fed’s larger than anticipated three-quarter point rate increase in June.
“I find it remarkable that just four months after beginning to raise rates, there is growing discussion of recession risk, and some forecasts are predicting interest rate cuts as soon as next year. Such projections suggest to me that a rapid pace of rate increases brings about the risk of tightening policy more quickly than the economy and markets can adjust.”
