Senior Fed official warns of emerging 'headwinds' from US government shutdown

The partial US government shutdown is an emerging headwind to the economic growth, the New York Federal Reserve President John Williams has said, reaffirming the central bank's willingness to take a patient and prudent approach to monetary policy.

Speaking at an economic forum held in New Jersey on Friday, Williams pointed out "emerging headwinds to growth" from the partial US government shutdown and "elevated geopolitical uncertainties" abroad, Xinhua news agency reported.

The Financial Times reported that he expected the shutdown to take half a percent or a percent off the first-quarter growth but expects a rebound after it ends.

Earlier this week, J.P. Morgan Chase CEO Jamie Dimon said that if the shutdown goes on for the whole quarter, it could reduce growth to zero.

The shutdown, which affected a quarter of the federal government and forced 800,000 federal workers to miss their paychecks, enters its 28th day on Friday.

Williams, a voting member and vice chairman of the central bank's policymaking Federal Open Market Committee, said he expects US economic growth to slow down this year, due to weaker global growth, fading effects of fiscal stimulus and less accommodative financial conditions.

He said the growth rate in 2019 should be somewhere between 2 pe rcent and 2.5 per cent.

According to its latest economic projections released in December, the Federal Reserve expected the US economy to grow at 2.3 per cent in 2019, down from the previous 2.5 per cent estimated in September.

"But let me be clear: a softer economic outlook doesn't mean we should prepare for doom and gloom," said the New York Fed chief, adding that the outlook is healthy.

Williams said the monetary policy approach the central bank need is "one of prudence, patience, and good judgment," and the "motto of 'data dependence' is more relevant than ever."

The Fed raised interest rates four times in 2018, and has signalled a slower pace of rate hikes this year as the US economy is expected to cool down.

--IANS

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