Feds Rosengren speaks to the Economic Club of New York
He adds:
- low unemployment suggests policy might be a bit tighter. Low inflation ascends the opposite signal
- most forecasts see economy growing about this potential and also regard low inflation readings as temporary
- Fed can afford to wait and see if economic forecasts materialize
- potential for more disruptive trade negotiations is an important reason for patients
- if US tariffs are widespread and prolonged, effect on markets and growth would be larger
- he assumes that unhelpful trade uncertainty will be transitory, have modest effect on US economy
- tariffs tend to raise prices on imported US goods, but some price hikes can be mitigated
- decline in apparel and investment services may not reflect underlying price trends
- broader US economy is on sounder footing than at the beginning of the year
- forecast modest step down from 2018 growth but enough momentum to push unemployment rate down
- inflation could return to Fed's target more rapidly if tariffs are imposed
- policy is currently slightly accommodative and consistent with inflation returning to 2%
- tariffs on goods from China Would Be Much More Apparent to US Consumers
- tight labor markets are one reason to expect inflation to rise to Fed's target
- one thing we are not good at estimating is the impact on financial markets from economic dislocations
- changing policy to welcome above target inflation during recoveries would reinforce policy makers 2% inflation aim
- not worried about missing the feds inflation target
