Dallas Fed President Robert Kaplan said yesterday that “the best argument” for him to support rate cut is the “shape” of the yield curve, inversion. And, a “tactical” reduction of a quarter point could address the risks seen by bond investors.
He also said that inflation is likely to remain low because of the change in the economy and the link between wages and prices. He added businesses are not able to pass on higher costs to customers because of stiff competition. They have to absorb lower profits so they don’t lose market share.
Separately, San Francisco Fed President Mary Daly said she’s not leaning one way or the other on July interest rate decision. And, she will learn a lot in the next two months regarding whether rates would be lower by year end.
On the one hand, she noted it’s too early to tell if additional stimulus was needed. And she saw no clouds looming on consumer spending and labor market. On the other hand, Daly noted business felt uncertain. She saw potpourri of headwinds, including trade, mood, uncertainty, global slowdown.