LONDON (MNI) – Boston Federal Reserve Bank President Eric Rosengren
warned late Tuesday that risks to the US recovery are still to the
downside and on the danger of higher oil prices.
Speaking at the National Institute of Economic and Social Research,
Rosengren said a sharper rise in oil prices is “certainly a possibility”
and that it could “derail a fragile recovery”.
Fiscal policy is another major risk, he said, noting there is a
danger, “fiscal policy could get very contractionary at the start of
next year”, although he added that there are “solutions” to fiscal
policy.
Still, “Monetary policy has to take fiscal policy into
consideration,” he said.
Pressed by a Japanese MOF official on whether the Fed might
diversify any future asset purchases into the private sector, such as
ETFs, Rosengren noted constitutional constraints, but said he would be
“very comfortable if we focus on mortgage-backed securities”.
The Fed official also conceded that the deviation between growth
and the labour market had been a “puzzle”.
Rosengren said businesses had over-corrected in 2008 when there was
“significant slashing” of jobs, but firms had possibly realised that
“they couldn’t keep workers working as hard as they have been working”.
But despite the recent better jobs numbers, “if we don’t get
additional growth we won’t get additional jobs growth”.
Rosengren lamented that growth was still extremely slow and
consumption weaker than one would otherwise have expected. The official
suggested that this could have been a “spillover” from the housing
market.
** MNI London Bureau **
[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]
