Fed speaks in three voices: from recession to bubbles and an economy that is doing well | America Economy

Washington. Federal Reserve authorities on Friday presented their differences on the state of the economy and what should be done about it, with warnings of a slowdown and financial risks mixed with how well things are progressing, just days after a split decision to lower the cups.

Usually central bankers may be asked to speak with one voice, but the Fed now has three: those who are ready to further reduce rates to contain economic risks, those who prefer to wait and see the data, and those who warn that the agency may already be feeding a credit bubble.

"The economy is on a good footing," Central Bank Vice President Richard Clarida said in an interview with CNBC, noting that although there are risks, a "virtuous circle" of employment gains, wages and a increase in household spending.

Consumption accounts for almost 70% of the US economy and "I can't think of a time when consumption has been in better shape," Clarida said.

That might be the case, but other Fed officials said the emphasis should be elsewhere, although they did not agree on where.

Bullard disagreed with this week's decision because he wanted a half percentage point cut in federal funds, and in a statement he said he feels that overall economic growth could also slow down in the "near horizon."

President Donald Trump has demanded deeper cuts in the cost of credit and sees the logic as simple: do it so that an already solid economy is more solid, with little or no risk.

But even those who agree with lower interest rates see the situation differently, with St. Louis Fed Chief James Bullard, arguing that the central bank should have further reduced rates to contain a weakness that includes a manufacturing sector that "already seems to be in recession".

Bullard disagreed with this week's decision because he wanted a half percentage point cut in federal funds, and in a statement he said he feels that overall economic growth could also slow down in the "near horizon."

The Fed voted 7-3 on Wednesday to cut its target range one day from rates by a quarter of a percentage point, to between 1.75% -2%, to counteract the global slowdown and the risks associated with the trade battle between Washington and Beijing. It was the second rate reduction this year.

"It is prudent risk management, in my opinion, to cut the rate more aggressively now and increase it later if the downside risks do not materialize," Bullard wrote. "Many of the estimates of the possibility of a recession have risen from low to moderate levels."

Recent data has been mixed, with some positive surprises, and Boston Fed Chief Eric Rosengren said the Fed should be careful to feed the credit when the economy is healthy. He also disagreed at the last meeting, but unlike Bullard, he didn't want a rate cut.

With unemployment near a record low, "no additional monetary stimuli are needed for an economy where labor markets are already tight," Rosengren wrote.