Philadelphia Federal Reserve Bank President Charles Plosser, who indicated a reluctance to lower rates at the Fed's last rate-setting meeting, said it would take a drastic fall in economic growth for him to support another rate cut.
I happen to think this decision was a close call, Plosser said of the October rate cut, in an interview published on Tuesday on The New York Times Web site.
The Fed last week cut its benchmark federal funds rate by 25 basis points 4.5 percent, where one member dissented. That followed an unanimous decision to cut the fed funds rate by a bold 50 basis points in September to prevent economic fallout from recent market turmoil.
Plosser is not a voting member of the Fed's rate-setting committee this year.
The Philly Fed chief said he would not be surprised if fourth-quarter growth came in at 1.0 percent to 1.5 percent.
That's already built into my forecast, he said. The key here is that growth would have to be less than the forecast to cut rates again.
Plosser said he had been a strong advocate of the central bank's decision to lower the fed funds rate in September, adding that he had not seen enough data by last week to justify more action, according to the interview.
My forecast now is about the same as it was in September, he said. In my view, I though we'd have more data available in December.
Philadelphia was also one of the six regional Fed banks that did not request a reduction in the discount rate at last week's rate-setting meeting, in tandem with the cut in the fed funds rate.
Plosser, who is regarded as one of the more hawkish members among Fed policy-makers, will be a voting member of the Federal Open Market Committee next year.
In a statement after the October meeting, the Fed said that risks were balanced for growth and inflation, indicating the central bank may not be as inclined to cut rates when it next meets in December.
Still, markets expect the Fed will have to lower rates again amid renewed market turmoil stemming from losses in the U.S. mortgage market.