Sonny ---wonder what this guy is smoking ---4.5%?
Fed's Moskow: Outlook Uncertain for 2001
By Kyle Peterson
VALPARAISO, Ind. (Reuters) - Chicago Federal Reserve President Michael Moskow said on Friday that uncertainty surrounds the outlook for the rest of 2001 but he thinks the economy will likely rebound gradually later in the year.
Moskow, a voting member of the interest-rate-setting Federal Open Market Committee this year, said long-term underlying fundamentals are sound, largely due to productivity growth which, while likely to slow, should remain on average at ''relatively high levels'' in the medium-term.
``The outlook for the remainder of the year is even more uncertain than usual,'' Moskow said of the economy in a speech prepared to be delivered at Valparaiso University.
But the reduction of inventory overhangs, the resulting pick-up in production and the effects of Fed rate cuts -- which have amounted to two full percentage points this year -- add up ''to an outlook in which growth gradually rebounds to more satisfactory levels later this year.''
The prepared remarks were made available before the government issued its monthly employment report. On Friday, the government said the jobless rate climbed to 4.5 percent in April from 4.3 percent the month before while nonfarm payrolls fell 223,000, the largest drop since the tail-end of the recession a decade ago.
The Chicago Fed chief said that while some of the economic slowdown was caused by a fall-off in consumer and capital expenditure growth, ``much of it was the inventory correction.''
He said that if it were not for the effects of the slower build-up of inventories, the first-quarter real growth rate would have come in at 4-1/2 percent rather than 2 percent.
Moskow repeated the Fed's warning that economic risks are still weighted to the downside. He said that risks to the economic outlook include consumer confidence, capital spending by businesses, energy prices and possible slower growth abroad.
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