This new Fed guy seems to have a good understanding of the current economics......which of course is good news.
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Fed's Santomero weak euro not hurt US, but watching
By Genevieve Wilkinson
MT. POCONO, Pa., Oct. 5 (Reuters) - Federal Reserve Bank of Philadelphia President Anthony Santomero said on Thursday the sickly euro has not yet hurt the U.S. economy, but the central bank is keeping a close eye on the currency.
"At the moment the euro has not substantially affected the real sector, but we are looking closely and will continue to monitor this closely," Santomero said after addressing the Pocono Northeast Regional Workforce Development Summit.
The newly appointed Fed official also said that recent figures point to a slowing of the fast-paced U.S. economy, which posted 5.6 percent annual growth in the second quarter
But the Fed remains alert to any inflationary pressures from rising oil prices and labor markets, he added.
"Our position has been, and I think it is substantiated by the bulk of data, that economic growth has slowed somewhat," Santomero said.
His words echoed a Fed statement issued on Tuesday when it voted to leave official U.S. rates unchanged at 6.50 percent but warned inflationary risks remain.
he United States surprised markets two weeks ago when it joined Group of Seven central banks in a buying spree to support the European single currency, which has shed about 25 percent of its value since its birth in January 1999.
At the time, policy officials cited the risks to the global economy from a weak European currency in making the decision to intervene in currency markets.
For the United States, the euro's drop has hurt earnings from major companies, including Intel Corp. <INTC.O>, Dell Computer Corp. <DELL.O> and Eastman Kodak Co. <EK.N>, while U.S. manufacturers are starting to complain the strong dollar makes their exports too expensive.
The currency slipped again on Thursday to lows not seen since the Sept. 22 intervention, with the decline coming despite the European Central Bank's surprise decision to raise its official interest rates by one quarter percentage point to 4.75 percent. Central bank rate hikes typically buoy a currency.
Turning to energy prices, Santomero said the U.S. central bank was keeping a close watch on signs of rising price pressures due to oil, which recently climbed above $37 a barrel before easing in recent weeks to around $30.
"The good news is that the U.S. economy is now more efficient than it was 20 years or so ago and that the implications are that the effect of higher oil prices will be less. Of course our concerns are toward inflation," Santomero said, adding policymakers would keep watching for any spillage into prices from rising oil costs.
In his prepared remarks, Santomero said the growing use of high-technology methods in business production has underpinned inflation-sapping productivity gains in recent years. The U.S. has enjoyed a decade of rapid growth, low inflation and the lowest employment rate in 30 years.
"At the heart of this strong performance is a marked acceleration in the growth of productivity, fueled by businesses' application of more high-tech methods to their production processes," Santomero said.
However, Pennsylvania has not benefited at the same pace, he said, due in part to the "relatively slow growth in our labor force."
Santomero, who was appointed Philadelphia Fed president in June replacing Edward Boehne, is a nonvoting member of the Federal Reserve's rate-setting Federal Open Market Committee. He is a former finance professor at the University of Pennsylvania's prestigious Wharton School of Business.
19:03 10-05-00 |
