By Claudia Hirsch
NEW PALTZ, NY (MNI) – New York Federal Reserve Bank President
William Dudley Thursday said the economy has recently entered a cycle of
increased household and business spending and job creation.
“You get more employment growth, you get more household spending,”
Dudley said, answering questions from an audience of students and local
business people following a morning speech at the State University of
New York at New Paltz.
That consumption, in turn, encourages business investment and fresh
hiring, Dudley said.
“In the past couple of months, you see that positive dynamic,” he
said. In his prepared remarks, Dudley lauded the recent improvement in
U.S. employment levels, and noted a strong rise in April job creation
that has brought the monthly average to 233,000 payroll additions over
the past three months.
Dudley also said he believes the Fed’s latest second round of asset
purchases, or what financial markets have dubbed quantitative easing, is
“one reason why we’re seeing more job growth today than last summer.”
But that job growth hasn’t yet led to higher pay. Dudley said
“subdued” wages may be partly responsible for the relative lack of
pass-through to broader price measures from sharply higher oil and
commodity prices.
Back on QE2, he said the Fed’s second tranche of quantitative
easing has eased financial conditions, improved credit availability and
stimulated the economy.
“We thought it would be helpful,” he said. “And we think it has
(been).” But Dudley said the Fed never viewed the $600 billion
asset-purchase program as a “panacea.”
Turning to U.S. fiscal policy, the monetary policy-maker said the
federal budget deficit is “not on a sustainable path.” Congress must
attend to the federal budget deficit over the medium to long term,” he
said.
“Regardless of what Washington does, we’re going to do our job and
keep inflation in check,” he said. And so far, Dudley said, the Fed’s
performed that task well.
**Market News International**
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