Federal Reserve officials downplayed concerns about the possibility of slowing growth in China Monday as U.S. stocks fell after a panic in Chinese markets.
The Dow Jones Industrial Average finished down 276 points, or 1.6 percent, Monday following the news of market turmoil in China. The index was down as much as 400 points earlier in the day as U.S. investors weighed the fallout of weaker-than-expected manufacturing data in China that caused enough concern in that country’s markets for the government to halt trading. The S&P 500 also fell by more than 1.5 percent.
In the fall, fears over financial turbulence related to China’s economy led the Fed to delay raising interest rates from zero. But on Monday, members of the Fed suggested that such worries currently are not a major factor in the Fed’s decision making.
“I don’t see that as a significant risk for the forecast,” Federal Reserve Bank of Cleveland President Loretta Mester said Monday in an interview with Bloomberg TV.
Mester, a voting member of the Fed’s monetary policy committee in 2016, said she has already built slower growth for China into her forecast.
Federal Reserve Bank of San Francisco President John Williams made similar comments in an appearance on CNBC.
“To me, it is not as surprising than maybe to some commentators that we’re seeing weaker data in terms of manufacturing,” Williams said of China. “This seems to be part of a process that’s been going on in the last couple of years.”
Williams emphasized that while U.S. exports have been hurt by slowing growth among its trading partners, the trend is still toward recovery. “In terms of the U.S. economy, we’re in very good shape,” he said.
Williams suggested the Fed may raise rates three-five times in 2015. In recent statements, the Fed has emphasized that it will raise its interest rate target only as justified by economic data and that the pace of further rate hikes is likely to be slow.
