By Lindsay Dunsmuir
WASHINGTON (Reuters) - The U.S. Federal Reserve is right to keep interest rates unchanged for the time being given the overall health of the U.S. economy, Kansas City Fed Bank President Esther George said on Tuesday.
"With an economy growing at or above potential, a strong labor market, and low and stable inflation, policymakers will need time to judge the proper stance of policy ," George said in prepared remarks about the U.S. economy to an audience at the regional bank's headquarters in Kansas City.
"Keeping rates on hold for now is appropriate in my view as we assess the economy's response to last year's rate cuts and monitor incoming data," she added.
The U.S. central bank lowered borrowing costs three times last year in a bid to ward off headwinds caused by slowing global growth and uncertainty over U.S. trade policy. George voted against cutting rates each time, arguing that the economy was still on a firm footing with U.S. economic growth, unemployment and inflation all in line with her outlook.
The Fed has now made plain that it plans to keep interest rates unchanged for the foreseeable future, and an easing in U.S-China trade tensions has bolstered the view that the longest U.S. economic expansion on record has room to run.
The United States and China are set to sign a "Phase 1" trade agreement on Wednesday in Washington after more than a year and half of escalating tit-for-tat tariffs.
Unemployment remains near a 50-year low and U.S. consumer spending, which accounts for roughly 70% of economic activity, is holding up.
"The good news is that the consumer is entering the new year with considerable spending momentum," George said, citing data which shows last year's reduction in mortgage rates had also boosted residential investment.
George cautioned, however, that there is still a potential that the weakness in manufacturing and business investment, which she sees persisting through this year, could curb consumer spending and require another rate cut, although she also left open the possibility the cuts could be reversed.
The Fed's rate-setting committee next meets on Jan. 28-29. Investors currently expect the Fed to cut interest rates once this year, but not until December, according to an analysis of Fed funds futures contracts compiled by the CME Group (NASDAQ:CME).