Afternoon Clownspeak:
<<DULUTH, Ga., Sept 18 (Reuters) - Strong growth in consumer demand necessitates a cautious monetary policy stance to keep a lid on inflation, Federal Reserve Bank of Atlanta President Jack Guynn said on Monday.
"While it's true that inflation remains relatively low, I believe that overall demand growth remains sufficiently close to productive capacity to warrant a cautious monetary policy stance," he said in remarks prepared for a luncheon to the Gwinnett County Chamber of Commerce.
"Consumers and businesses have had no problem generating momentum, but inflation is the one thing that could stop them," he said. "Economic shocks can still happen. And policymakers can still make mistakes. As long as those ... remain, the possibility of inflation remains, too."
Fed policymakers have kept a close eye on consumer spending, out of concern the nation's appetite for goods and services would continue to climb beyond the country's ability to produce, sparking higher prices and potentially eroding the record U.S. economic expansion, now in its 10th
year.
Consumer spending rose at an annual rate of 2.9 percent from April to June, down sharply from the 7.6 percent gain posted in the first quarter. Consumer spending typically fuels two-thirds of the nation's economy.
Guynn is a voting member this year on the Federal Reserve's rate-setting Federal Open Market Committee.
The FOMC has raised interest rates six times between June 1999 and May to keep inflation at bay. However, it has kept rates steady after the last two meetings amid signs the U.S. economy is slowing from its torrid pace and strong gains in worker productivity is helping contain price pressures.
The Fed next meets on Oct. 3 amid widespread expectations it will hold steady again.
Rising productivity enables companies to churn out more goods without having to add to their payrolls. Earlier this month, the government said productivity rose at an annual rate of 5.7 percent between April and June, much higher than the 1.9 percent rise recorded in the first quarter.
Year-over-year, second-quarter productivity rose 5.2 percent, the largest rise since a 5.3 percent gain in the third quarter of 1983.
But Guynn warned that it was unclear how long those gains in worker productivity would continue.
"The essential question is not whether this shift has taken place, but whether it can continue," he said. "It didn't in Asia, where the transition was a lot more fundamental, and I'm not sure it will here, either.
"The World Wide Web, remember, went from one scientist's personal computer to ubiquity in a decade. But if the productivity shift is permanent, then the information technology revolution cannot be a once-in-a-lifetime development. It will have to happen again, and be even more profound, in the next 10 years. As much as I believe in American ingenuity, that seems a bit much to ask.">>
That's 3 today all saying the same thing. Where's that darn coupon pass? |
