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With the U.K. government proposing big tax cuts and increased spending, U.K. and global markets have been reflecting “concern and fear” that the plan will have on the British and global economy, said Atlanta Fed President Raphael Bostic in an online event hosted by the Washington Post. “The proposal has really increased uncertainty,” he added.
When asked if the U.K. proposals will increase the risk of a global recession, Bostic said “I think it doesn’t help… A basic tenet of economics is more uncertainty leads to less engagement by consumers and businesses.”
The developments overseas and any weakening of the European economy would also affect the U.S. economy, he added.
As for market volatility and slower economic growth in the U.S.: “The important thing is we need to get inflation under control,” Bostic said. Once inflation gets closer to the Fed’s 2% goal, “it will be far less likely that we’ll see the wild swings we’ve seen over the last several weeks.”
“We’ve still got a ways to go to control inflation,” he added. The Federal Reserve is “only now getting to a point” where policy is getting “slightly constrictive.” The U.S. economy isn’t not yet in reflation, “but we’ll definitely have to keep an eye on it.”
He also talked about the Fed’s role in addressing wealth inequality in the U.S. and it ill take “many, many years” to address it. That inequality has led to constraining economic growth since many people weren’t able to contribute, he said.
Bostic repeats that he’s “laser-focused” on the Fed’s dual mandate of full employment and price stability. To better monitor the U.S. economy, the central bank is seeking more real-time data.
Earlier, Nomura sees British pound below parity with U.S. dollar by year-end
