SPARE CHANGE: Does the Fed have a plan for interest rates?

With the fourth quarter underway, it’s time once again to play America’s favorite economic parlor game: Interest Rate Jeopardy.

And it is no coincidence that the answers must be phrased in the form of a question, given the growing uncertainty surrounding the future path of monetary policy.

At the conclusion of a two-day meeting of the Federal Open Market Committee last week, Fed Chairman Jerome Powell reiterated several times the central bank’s rosy view of the U.S. economy, kicking off a news conference saying “growth is running at a healthy clip” and that risks to the economic outlook “appear roughly balanced.”

There are still a lot of questions about the future path of interest rates, despite Powell’s statement that Fed policymakers anticipate gradual rate hikes to continue. However, what may seem gradual to some, may appear differently to others. And that is raising some concerns.

For Garry Lubi, senior vice president at CenterState Bank in Palm Coast, how the Fed approaches monetary policy in the coming months is key.

“My concern is will the Fed move the rate up too high, too fast,” he said.

While the FOMC vote to raise a key interest rate last week was unanimous, there have been some people arguing for a re-examination of Fed policy because too many rate hikes could slow economic growth.

By the central bank’s own calculations, that slowdown is already in the offing. According to Fed economic projects, the median gross domestic product for all of 2018 will be 3.1 percent and then slow to 2.5 percent in 2019, 2 percent in 2020 and 1.8 percent in 2021. So the need for an accommodative interest rate policy, one that helps stimulate economic growth via lower interest rates, remains.

Asked at the Sept. 28 press conference how the Fed will know when to stop raising rates, Powell did not give a precise answer, instead saying policymakers will keep a close eye on developments.

“The fact we have moved quite gradually allows us to carefully watch incoming data in the economy,” he said.

But that variation on the late Supreme Court Justice Potter Stewart’s contention that he would recognize obscenity “when I see it” is not very reassuring.

With potential complications from the British exit from the European Union, growing trade differences between the U.S. and China and growing pains in emerging economies, there are plenty of reasons to be cautious.

For Lubi, the biggest threat to the economy may not be the financial system or international trade, but other domestic issues.

“I think probably the larger risk to the economy today seems to almost be the political factors,” he said.

With that Pandora’s box of issues injected into the mix, it is hard to believe that Fed policymakers, no matter how closely they scrutinize economic data, will catch the early signs of an economic downturn in time.

And with little wiggle room on interest rates, there may not be much they can do anyway.