Featured Post from University of Rochester

Not this time, but expect interest rates to get cut soon – our expert can explain why

Jun 20, 2019

2 min

It was all eyes on the Fed this week, but when it came to decide, Federal Reserve Chairman Jerome Powell held U.S. Interest rates steady and unchanged.

The pressure was on to lower the rates amid serious concerns that the current trade wars and tariff action could start impacting America’s economy and slow it down.

Narayana Kocherlakota, the Lionel W. McKenzie Professor of Economics at the University of Rochester wasn’t surprised by the June decision to remain steady. And with serving six years as president of the Federal Reserve Bank of Minneapolis, his expertise and perspective indicates lower rates will come at the next meeting.

“I am not expecting a change in policy, which means the interest rates should remain the same. What I am expecting is a lot of discussion, which takes place in secret, about cutting interest rates by a quarter percentage point at their next meeting in July. Why would they do that? The Federal Reserve is tasked with trying to keep inflation at 2 percent and keep unemployment low. Right now unemployment is about as low as it’s been in the past half-century, which is very good. Inflation remains lower than the Federal Reserve would like—it’s been below 2 percent for most of the last seven years. I think they’re mainly worried about risks. There are signs of risk around the world partly due to big variations in trade policy emerging from the White House. So, the Fed is thinking about cutting rates now in order to keep the economy as healthy as possible, if there’s any danger of a recession.” University of Rochester Newscenter.

Will lower rates really keep America’s economy humming?
Won’t lower rates impact the strong US dollar?
And if we are headed toward recession, what else can de done to turn the economy around?

There are a lot of questions – and that’s where our experts can help.

Dr. Narayana Kocherlakota was the President and CEO of the Federal Reserve Bank of Minneapolis from 2009-2015. As part of his responsibilities in that position, he served on the Federal Open Market Committee (FOMC), the monetary policymaking arm of the Federal Reserve System. He is currently a Lionel W. McKenzie Professor of Economics and is an expert in financial economics, interest rates and monetary policy. Narayana is available to speak with media regarding the economic effects of the shutdown – simply click on his icon to arrange an interview.

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Narayana Kocherlakota

Louis and Henry Epstein Professor of Business Administration at the Simon School of Business

Professor Kocherlakota's research includes theoretical and empirical contributions to many fields in economics

Central BanksU.S. Federal ReserveDynamic Games/ContractsFinancial EconomicsEconomics of Money and Payments

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