Fed's goal 3-5 years of stable prices, member says
WASHINGTON, July 1 (Reuters) - The Federal Reserve Board wants to halt inflation before it damages the U.S. economy, not stop growth in its tracks, according to a member of the central bank's rate-setting committee.
Federal Reserve Bank of Cleveland president Jerry Jordan, in a written speech prepared for the Western Economic Association International conference on Saturday, said the Fed aimed to maintain price stability over a period of three to five years.
"It is imperative that we maintain the purchasing power of the dollar ... Not minute by minute, not necessarily at the frequency at which the (Federal Open Market Committee) meets, but over some longer time horizon, maybe three to five years," Jordan wrote.
The remarks were included in a copy of the speech released in Washington. Jordan excluded them from his actual address to the economists' in Vancouver, British Columbia due to time constraints and concentrated on general economic issues.
Jordan, a member of the committee, added in his written remarks; "There should be no perception that the central bank is 'anti-growth.'"
On Wednesday, the FOMC voted to leave interest rates unchanged, taking a break from its yearlong campaign of raising rates to stop inflation from harming the U.S. economy. The Fed has raised rates six times in the last year to the highest level in nearly a decade.
Fighting inflation is important because it promotes price "predictability," Jordan wrote.
"If the rules are transparent enough, people know with some amount of certainty how the monetary authorities will respond," he said. "If they know that policymakers have a three- to five-year horizon, then seeing an uptick in price statistics in one quarter will not cause them to alter their behavior."
In his actual address at the conference Jordan told the economists that just because there have been dramatic technological advances in recent years it did not mean there had been fundament changes in the nature of the economy.
"The fundamental determinants of a healthy economy are the same as they ever were," he said. |
