Fed Officials Admit Global Slowdown Could Impact Rate Rises

Federal Reserve officials on Saturday took stock of a slowdown in the global economy and said it could delay an increase in U.S. interest rates if serious enough.  Most notably, Fed Vice Chairman Stanley Fischer said the effort to finally normalize U.S. monetary policy after years of extraordinary stimulus may be hampered by the global outlook.

“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” he said at an event sponsored by International Monetary Fund.  Nevertheless, he said betting in financial markets on the timing of a U.S. rate hike appeared “roughly” on the mark given the Fed’s current expectations on how the economy’s recovery would unfold.

The IMF trimmed its global growth forecast ahead of its fall meetings this weekend, where discussions focused on ways to stimulate global demand and prevent the euro zone from slipping back into recession.  “I am worried about growth around the world, there are more downside risks than upside risks,” Fed Governor Daniel Tarullo said at a conference the Institute of International Finance sponsored on the sidelines. “This is obviously something we have to think about in our own policies.”

Reuters

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