In a speech on Friday, Federal Reserve Governor Randal Quarles expressed confidence in the US economy, saying that more rate hikes are likely to be appropriate to counteract the prevailing market wisdom.
Over the past few days, several Fed officials have said the discussion on interest rate cuts is premature. The current market prices apply to the first cut already in September, with a chance of about 25 percent for a further reduction before the end of 201
The Fed's interest rates currently range between 2.25 and 2.5 percent. Quarles believes that the "neutral level," which is neither stimulatory nor limiting to growth, is significant. When Fed Chairman Jerome Powell said in October that the FOMC was "far away" from neutrality, he triggered a violent sell-off on Wall Street that briefly touched the bear market area.
President Donald Trump, who has nominated Quarles The Fed has been tough, saying the pattern of rate hikes, including ours in 2018, has hindered an otherwise strong economy.
Quarles acknowledged that "growth has slowed down, at least temporarily," as recent data shows.
"Nevertheless, I am optimistic about the outlook for the US economy and I think we have the potential to keep growth at a healthy pace in the coming years," he said.
"Looking at Short-Term Data I see many reasons for relatively strong growth in the coming years, supported by productivity gains in the economy," he added.
The comments went to the Shadow Open Market Committee, a group of economists who oversee the Fed and gather to recommend policy approaches.  Breaking away from the idea that the Fed will be held indefinitely, Quarles said the Fed should be data-driven in its decisions. However, he understood this by saying that he should not make decisions based solely on isolated metrics.
"I prefer a framework that makes it clear that we are focusing on broad trends – elsewhere I have used the aviation analogy We should not chase the needles on the dashboard, we should realize that While we will respond to the clear and lasting development of these broad trends, we will not respond to all volatile data, "he said.