Fed Action May Have to Wait

Remarks by a Fed official may be intended to dampen the current round of speculation about an imminent rate cut.
Ed ZwirnFebruary 27, 2001

The Fed may need more time than a few days to decide whether a rate cut is needed, according to one of its top officials.

How the “apparently conflicting signals” the Fed has to interpret “will be resolved going forward is not at all apparent from today’s vantage point, and will bear close scrutiny,” Federal Reserve Vice Chairman Roger W. Ferguson, Jr., told a New York audience this afternoon.

The remarks, which were included in a talk on “Financial Consolidation” to a conference sponsored by the Securities Industry Association and the University of North Carolina Law School, appeared designed to throw cold water on speculation that a 50 basis point rate cut could come as soon as this week, way ahead of the next Federal Open Market Committee meeting scheduled for March 20.

Among the “conflicting signals” cited by the Fed Vice Chairman was the fact that “household spending appears thus far to have held up well” despite a recently reported “sharp weakening in consumer sentiment.”

“Sentiment seems to have limited predictive ability for future household spending,” he added.

Also, Ferguson, while acknowledging a “significant deceleration” in the economy, was quick to balance this concern by noting recent “adverse movement in inflation rates.”

As is usually the case with speeches by prominent Fed officials, Ferguson’s remarks came with the following disclaimer: “The views… are my own and not necessarily shared by other members of the Board of Governors or of the federal Open Market Committee. Click here for the complete text of Ferguson’s speech