Fed's McTeer Commits to Stemming Slowdown
Friday April 6, 11:39 am Eastern Time
By Anna Willard
<<WASHINGTON (Reuters) - Dallas Federal Reserve President Robert McTeer pledged on Friday that the U.S. central bank would do what it could to stem the downturn in the nation's economic growth.
Speaking to reporters after a speech to a manufacturing forum, McTeer said he did not know when the slowdown would end. ''We're committed -- and I'm committed -- to making it as soon as possible.''
McTeer, who is currently a non-voting member of the central bank's Federal Open Market Committee which sets interest rates, said that while inflation has ticked higher, the Fed is currently more focused on keeping the state of the economy from deteriorating further.
``There has been inflation creep,'' he said. ``However, right now the priority is on avoiding a worse slowdown -- the focus now is on economic growth rather than inflation.''
McTeer said that he was pleased to see that during the final three months of the year, gross domestic product managed to grow by 1 percent, according to the Commerce Department.
``One is not good. It's bad but it's a positive number,'' McTeer said, noting that most economists loosely define a recession as two quarters of declines in GDP.
The Commerce Department's fourth quarter GDP figures are the most up-to-date numbers currently available. The just-ended first quarter figures are due out in late April.
Describing where he thought first-quarter GDP would come in, McTeer said: ``I don't know but it felt a lot like the fourth quarter so I'm saying it's going to be somewhere close to zero, maybe a little above or a little below.''
COULD HAVE BEEN WORSE
Asked about the latest Labor Department figures showing a steep drop of 86,000 in March payrolls and a rise in the unemployment rate to 4.3 percent from 4.2 percent, McTeer said the report was not what he would like to see but added that it could have been worse.
``It's bad to see employment decline but the amount of the decline was moderate compared to what it could be,'' he said. He noted that the unemployment rate of 4.3 percent was still ``very close'' to the 30-year low of 3.9 percent the jobless rate hit during 2000.
He told the manufacturing conference earlier that the latest consumer confidence numbers were ``sort of encouraging.''
The confidence U.S. consumers have in the economy ticked up slightly, according to two closely watched measures released last month.
The outspoken Dallas Fed president said the U.S. dollar was holding up currently but a loss of faith by the rest of the world could have a dramatic impact on the currency.
``Capital inflows are holding the dollar up despite the negative tone of the current account deficit,'' McTeer said.
He said that at the moment, the United States remains an attractive place for the world's savers.
``If something should happen to cause them to lose faith, then there would be a problem and a dramatic downward pressure on the dollar,'' McTeer added.
McTeer, a tireless booster of the notion that we are in a ''new economy'' because of the technological revolution, said the ideal of the new economy was not dead. He added that his definition of the new economy had never included an end to business cycles or a stock market that could ``defy gravity.''
He said that it was easy to see why the technology stock bubble had burst. U.S. stocks were on their way back down after a sharp rally on Thursday, hurt by the unexpected tumble in March payrolls.
McTeer said he expected U.S. productivity growth to stay around 3 percent in the long term.
``The new economy is not a mirage,'' McTeer said. ``It was real and will be back.''>> |
