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Rosengren says Fed may have to wait for economic data to improve

Wednesday, February 17, 2016 - 09:03
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Federal Reserve Bank of Boston President Eric Rosengren said turmoil in financial markets and weak global growth could slow progress toward the Fed's policy goals and may delay the need for additional interest-rate increases.

[BOSTON] Federal Reserve Bank of Boston President Eric Rosengren said turmoil in financial markets and weak global growth could slow progress toward the Fed's policy goals and may delay the need for additional interest-rate increases.

"Recent global events may make it less likely that the 2 per cent inflation target will be achieved as quickly as had been projected in recent forecasts by private economists or by Federal Reserve policy makers," Mr Rosengren said in the text of a speech he is scheduled to deliver Tuesday in Waterville, Maine. "If inflation is slower to return to target, monetary policy normalisation should be unhurried."

Fed policy makers raised interest rates in December for the first time in almost a decade. They also projected that that four additional rate hikes were expected in 2016, if the US economy continued to add jobs and inflation moved closer to target. Drops in oil prices and stocks, partly in response to an eroding outlook for China and other emerging markets, have since put that policy path in doubt.

The Federal Open Market Committee, on which Mr Rosengren holds a vote this his year, meets next on March 15-16 in Washington.

Mr Rosengren, speaking at Colby College where he earned his bachelor's degree in economics in 1979, voiced concern over the lasting impact that oil's decline and the dollar's strength may have on future inflation expectations.

"We cannot take for granted that regular, persistent, but seemingly temporary shocks to inflation will not have a larger and more lasting impact," Mr Rosengren said.

The FOMC said on Jan 27 that inflation would rise to 2 per cent over time as the "transitory effects" of cheaper energy and a stronger dollar fade, and as the labour market improves further.

BLOOMBERG