Fed's Rosengren warns co-working spaces may be creating financial risk

St Louis Federal Reserve Bank President James Bullard speaks at a public lecture in Singapore

St Louis Federal Reserve Bank President James Bullard speaks at a public lecture in Singapore

The Fed announced on Wednesday that it was cutting the benchmark rate by a quarter-point to a new range of 1.75% to 2% as it seeks to cushion the USA economy from various threats, ranging from a slowing global economy to shocks from President Donald Trump's trade war with China.

The Fed's policy-setting committee on Wednesday cut the benchmark borrowing rate by a quarter-point to a range of 1.75-2.0 percent, but Bullard, president of the St Louis Fed, said a half-point cut "would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks".

Fed officials who moved to cut rates have described the move as a way to pre-empt data turning sour in the US amid trade tensions and geopolitical concerns overseas. Cutting rates in July and September, he said, "will improve the growth outlook and it may make it in fact less likely that there are incentives for people to borrow and leverage and take risk - they may still do it, but it won't be because rates are lower".

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'It is prudent risk management, in my view, to cut the policy rate aggressively now and then later increase it should the downside risks not materialise'. The FOMC chose to cut its benchmark interest rate for the second time this year citing "implications of global developments for the economic outlook as well as muted inflation pressures".

Rosengren also anxious that lower interest rates would invite more leverage in the financial system, expressing specific concern over whether cheap financing would expose co-working companies like WeWork in particular.

"If you think the consumer is going to hold up it's pretty hard to have a bad outcome", Rosengren said in answer to a question following a speech outlining his opposition to Wednesday's rate cut by the Federal Reserve.

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George did not issue an explanation for her dissent against this week's rate cut. It was the second Fed rate reduction this year.

As a result of the change in rates and updated economic views, that gap has narrowed substantially, a positive development for a central bank whose top officials are being careful now not to flag what their next move might be until there is more information about the economy's underlying health and direction. -China trade talks, often based on comments or tweets from Trump, a cycle that many investors are becoming accustomed to. "The FOMC will take decisions meeting by meeting".

Federal Reserve Vice Chairman Richard Clarida, meanwhile, refuted these arguments, saying in an interview with television business news channel CNBC that "clearly the center of gravity on the committee" is that the latest rate cut was "appropriate".

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