Fed in three voices: recession, bubbles, and 'in a good place'
By Howard Schneider and Ann Saphir
(Reuters) - After delivering a split-decision rate cut earlier this week, U.S. Federal Reserve officials put their divisions on full display Friday, with warnings of a slowdown on the one hand and financial risks on the other bookending talk of how well things are going.
Central bankers are often called on to speak with one voice, but the Fed now has three - those ready to reduce rates even lower to ward off economic risks, those who prefer to stand pat and watch the data for now, and those warning that the Fed may already be fueling a credit bubble.
"The economy is in a good place," Fed Vice Chair Richard Clarida said in a CNBC interview, noting that while there are risks, there is also a "virtuous circle" under way of job gains, wage gains, and increased spending among households.
Consumption accounts for nearly 70% of the U.S. economy, and "I cannot think of a time in aggregate when the consumer has been in better shape," Clarida said.
Fed policymakers voted 7-3 to reduce their target overnight policy rate by a quarter of a percentage point on Wednesday, to a level of between 1.75% and 2.0%. It was the second Fed rate reduction this year.
The move, which Clarida supported, was aimed at offsetting slowing global growth and risks associated with U.S. President Donald Trump's trade battles with China.
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