The US economy faces “notable” risks and the central bank can take a wait-and-see approach to monetary policy, Kansas City Federal Reserve Bank President Esther George said on Wednesday.

“Over the medium term, I see the biggest risk coming from slower growth abroad, particularly in China, the euro area, and the United Kingdom, ” Ms George said in a speech delivered in New York.

Ms George said the US economy’s fundamentals still appeared sound and that job growth would likely rebound from a weak performance in February.

She said domestic factors, including the waning effects of US government stimulus, also contributed to a median projection by Fed policymakers falling to 2.1 per cent growth for 2019 at its most recent meeting last week, a full percentage point below the roughly 3 per cent growth that was seen in 2018.

“My outlook calls for growth to slow to trend, with moderating job gains and low inflation,” she said. “In these circumstances, monetary policy can take a wait-and-see approach.”

The potential for a slowdown has led may in the markets to bet that the Fed’s next move will be a rate cut. President Donald Trump’s expected nominee for a seat on the Federal Reserve Board of Governors, Stephen Moore, said in an interview with the New York Times on Tuesday that the central bank should not have raised rates in September and December 2018 and that they should reverse course.

Asked if she felt those two rate hikes were a miscalculation, Ms George said, “No, I do not think we made a mistake in September.”

Ms George said she supported the Fed’s plans to conduct a review of monetary policy strategy this year. She said some proposed changes to its framework had merits, including proposals for the Fed to commit to making up for years of below-target inflation.

At the same time, she listed a number of reasons why such a framework might not work or could even do harm to the economy.

“I see both fundamental and practical issues to grapple with in moving to such regimes,” Ms George told the Money Marketeers of New York University Inc, a finance industry scholarship group.

However, Ms George said it might be reasonable for the Fed to allow “even somewhat persistent” deviations from its 2 per cent inflation target.

“If they are limited to, say 50 basis points above or below the objective (they) may be acceptable, depending on broader economic conditions.” – Reuters