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Fed’s George Warns Rate Cut Could Lead to Bubbles and Recession

  • Kansas City Fed leader praises a patient approach to policy
  • George isn’t concerned by inflation running a bit below 2%
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Federal Reserve Bank of Kansas City President Esther George said she’s opposed to cutting interest rates in order to raise inflation to the central bank’s 2% target, warning that could lead to asset-price bubbles and ultimately an economic downturn.

“Lower interest rates might fuel asset price bubbles, create financial imbalances, and ultimately a recession,’’ George, who votes on monetary policy this year, said Tuesday to the Economic Club of Minnesota. “In current circumstances, with an unemployment rate well below its projected longer-run level, I see little reason to be concerned about inflation running a bit below its longer-run objective.”