In an apparent bid to reassure markets troubled by hawkish rhetoric from the Federal Reserve, vice-chairman Don Kohn on Wednesday said the US central bank would be ”flexible and pragmatic” in responding to the renewed stress in financial markets reports the Financial Times.
Mr. Kohn said that the increased”turbulence” of recent weeks had”partly reversed some of the improvement in market functioning over the late part of September and in October.”
He added: ”Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses.”
His comments suggest that the Fed leadership recognizes that the risks to growth have increased since the last policy meeting.
They indicate that the Fed would consider cutting rates in December if market conditions do not improve in the meanwhile.
However, Mr. Kohn stressed the high degree of uncertainty over the outlook.
Mr. Kohn’s comments came as data from the Commerce Department showed that new orders for manufactured products fell for the third month in a row in October as businesses held off from making investments.
Read it here: Fed seeks to Calm Markets