Esther George, president of the Federal Reserve Bank of Kansas, said that with full employment levels and price stability, monetary policy should have a neutral effect, although there is a great deal of uncertainty about whether it is needed or how fast it is.
The Federal Reserve has raised interest rates twice this year and has indicated it will raise rates twice more before the end of this year.
Esther George will resume voting on monetary policy at the Fed's next meeting after a two-and-a-half-year hiatus, has in the past called for a faster rate hike than her colleagues. George said the economy is in excellent shape but sees great risks that could grow very quickly due to fiscal stimulus, global accommodation or a sharp slowdown due to trade policy.
She said she was concerned that the Fed could mismanage the emerging financial imbalances that have accumulated over a long period of easing policy. She explained that the unemployment rate at 4% and inflation according to the preferred measure of FED, which recently rose to 2.3% higher than the goal of the Federal Reserve, monetary policy is currently testing the limits of how it can decrease unemployment without causing any undesirable increase in inflation.
