|
Calling the Fed's first-in-a-decade rate hike in December
"uneventful" so far, Rosengren said much of the news since then
has not been good.
The rout in China's stock market, weak oil prices and other
factors are "furthering the concern that global growth has
slowed significantly," Rosengren told the Greater Boston Chamber
of Commerce. In addition, end-of-year gross domestic product
estimates for the United States are "raising the possibility
that domestic growth could be slowing."
Combined with continued weak readings on inflation, it means the
Fed may have to slow the expected pace of rate hikes, which
officials in December projected at four quarter-point increases
over the coming year.
"While monetary policy should not overreact to short-term
temporary fluctuations in financial markets, policy makers
should take seriously the potential downside risk to their
economic forecasts and manage those risks as we think about the
appropriate path," Rosengren said. "These downside risks reflect
continued headwinds from weakness within countries that
represent many of our major trading partners, and only limited
data to support the projected path of inflation to target."
A second hike will face a strict test, said Rosengren, who votes
on the Fed's rate-setting committee this year.
"Further tightening will require data continuing to be strong
enough that growth will be at or above potential, so that
Federal Reserve policymakers can be confident that inflation
will reach our 2 percent target."
Rosengren is the second Fed official this week to suggest that
international conditions, and specifically doubts about China's
economic growth and continued weak inflation, could be tugging
the Fed's expected path of rate hikes downward.
On Monday Atlanta Fed president Dennis Lockhart said he did not
think there would be enough new data in hand to make a decision
on a second hike until at least April, in part because of
China's effect on U.S. equity markets.
(Reporting by Howard Schneider in Washington and Svea
Herbst-Bayliss in Boston; Editing by Chizu Nomiyama)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |
|
