–With Econ Hardship,Fed To Do Everything It Can To Promote Dual Mandate
–Unemployment Rate Still ‘Significantly Elevated’
–Monetary Policy Alone Insufficient To Restore Household Wealth

By Chris Cermak

WASHINGTON (MNI) – Federal Reserve Governor Sarah Bloom-Raskin
Thursday said recent U.S. economic news is encouraging and suggests the
recovery is picking up pace, but unemployment remains “significantly
elevated” and the Fed will continue to do all it can to promote maximum
employment and price stability.

Speaking to business and community leaders at the Los Angeles
branch of the San Francisco Fed, Raskin said the Fed’s monetary policy
since the economic crisis had helped lower interest rates, were felt
“quite broadly” in financial markets, promoted competitiveness by
lowering the value of the dollar and contributed to “relatively robust”
business spending in the recovery.

“In light of the economic hardships that have been endured in Los
Angeles and nationwide, the Federal Reserve remains fully committed to
doing everything it can to promote maximum employment in the context of
price stability,” Raskin said.

Raskin said the economy and labor market had “improved modestly” in
the last two to three years. She cited the decline in the unemployment
rate over the last six months but said March data showed “the
unemployment rate was still significantly elevated at 8.2%.”

Raskin also said spending on consumer durables had started to pick
up and cited “recent indications” that small business sales had started
to improve, though credit conditions remained tight and many small
businesses “remain cautious” about the economic outlook.

“Nationally, some economic news has been encouraging and may be
suggesting the pace of the recovery is picking up,” Raskin said, but
added: “The national economic recovery clearly has a long way to go.”

Raskin said by contrast the housing sector, having magnified the
recession, was still delaying recovery. The related decline in household
wealth and high indebtedness may be affecting consumer spending far more
deeply than has been recognized, she said, suggesting monetary policy
alone cannot improve the situation.

Research “suggests that consumer spending may not act powerfully to
revive the economy until Americans’ financial situations have improved,”
Raskin said. “Alternatively understood, this research finding suggests
that monetary policy alone may be insufficient to promote a more robust
and sustainable improvement in household wealth.”

–Chris Cermak is a Washington reporter with Need to Know News

** MNI Washington Bureau: 202-371-2121 **

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