Should The Fed Lower Rates? Janet Yellen Thinks So

The list of experts in favor of the Federal Reserve lowering its benchmark rate gained more validity over the weekend after former Chair Janet Yellen said she supports a 25-point basis cut.

What Happened

Yellen, chair of the Federal Reserve from early 2014 to early 2018, said at the Aspen Economic Strategy Group meeting on Sunday the global economy has weakened from conflicts over trade, according to CNBC. The U.S. is not isolated from the global economy and what happens elsewhere will impact the U.S., she said.

The opposite also holds true as U.S. monetary policy impacts other regions of the world, Yellen said. As such, top priority for the current Fed leadership team should be implementing policies to support a strong U.S. economy -- including a rate cut.

"I think in lights of the risks, I would be included to cut a bit," CNBC quoted Yellen as saying. "I wouldn't see this as the beginning, unless things change, of a major easing cycle. But I do think it's appropriate."

Why It's Important

Discussions related to rate cuts comes at a time when economic indicators continue flashing strong signals, including July's job report which showed the addition of 170,000 nonfarm payrolls to the economy.

The U.S. economy also showed a 2.1% growth rate in the second quarter, which represents a slowdown from 3.1% in the prior quarter but still better than the 2.0% economists were expecting.

The Fed will gather this week on Tuesday and Wednesday.

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Photo by Dustin Blitchok.