Brainard speaks with Steve Leisman:
- Trade uncertainty has been major factor weighing on economy in past year, cities business investment
- We've taken out insurance on trade but we still hear from business contacts saying they're waiting on clarity
- 'Certainly' more tariffs in Dec would be a realization of downside risks
- 0.4% tracking forecasts for GDP are quite a bit lower than consensus
- The US consumer has proven to be more resilient
- Most of the businesses we talk to that are consumer-facing continue to be quite upbeat
- We see some special factors weighing now that will begin to unwind in Q1
- I see economy growing slightly above trend in the next year
- I see inflation moving up to 2% and a bit above
- The slowdown in trade is a concern and a question mark but expect consumer and domestic growth to be solid for next year or year-and-a-half
- Our economy is much stronger than the EU, that's why US rates are higher
- I want to assess how economy is reacting to cuts; we're starting to see residential investment
- I want to wait for a 'little bit' as I asses outlook
- Repeats need for 'material' change in outlook before moving on rates
- Downside risks remain prominent
- I worry about financial imbalances
Brainard was generally upbeat but didn't stray from the Fed playbook, which says it will take a material shift in the outlook to get back on the rate cutting path. However she was asked about tariffs and said the December tariffs would 'certainly' be a realization of downside risks. Does that make a cut likely if trade talks go off the rails? I believe so.
However if there is a trade deal, everything she said suggested a long wait on the sidelines. Then when we get into the second-half of 2020 there is an election and then the bar to move is even higher.
