February 11, 2020 / 8:04 PM / in 16 days

Fed's Kashkari says monetary policy is not very accommodative

(Reuters) - The Federal Reserve’s monetary policy is delivering no more than a small boost to the economy, Minneapolis Federal Reserve Bank President Neel Kashkari said on Tuesday.

After cutting interest rates three times last year, the Fed now targets short-term borrowing costs at between 1.5% and 1.75%. That puts policy “close to neutral or slightly accommodative today, but not very accommodative,” Kashkari said at a Town Hall streamed live from Kalispell, Montana.

Kashkari had called for deeper and faster rate cuts to cushion the economy from the effects of trade policy uncertainty and slowing growth than the Fed actually delivered. Fed policymakers have signaled that with U.S.-China trade tensions easing and global growth no longer on the downswing, rates can likely stay where they are for the time being.

Asked about the possible economic impact of the coronavirus epidemic in China that has killed hundreds, sickened tens of thousands, and is predicted to deliver a big hit to Chinese growth this quarter, Kashkari said he is watching closely.

“It is something clearly that is a downside risk for China, and if it were to come to the U.S. in scale, would be a downside risk for our econonmy,” Kashkari said. “If it really was large enough to hit the U.S. economy, one could imagine monetary policy responding, not to the virus itself but to just to try to help the U.S. economy manage its way through until the public health officials can get their arms around it.”

Fed Chair Jerome Powell, speaking earlier in Washington, said the epidemic would likely have some effect on the U.S. economy, but it was too early to tell if it would be deep enough or persistent enough to require a response from the Fed.

Reporting by Ann Saphir; Editing by Chizu Nomiyama and Jonathan Oatis

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