Moskow stays the course on rates
Low inflation, scant job growth justify steady Fed
Chicago Federal Reserve President Michael Moskow reaffirmed on Monday the U.S. central bank's plan to be patient in raising U.S. interest rates as long as inflation remains quiescent and hiring lags.
"With inflation low, the Fed can be patient in removing its policy accommodation. However, this stance cannot be maintained indefinitely," Moskow said in prepared remarks for a speech to a meeting of the Risk Management Association and National Funding Association in Chicago. His speech largely echoed his two previous talks on the U.S. economy.
"As the economy picks up and the output gap narrows, the real funds rate will have to rise to a level more compatible with sustainable economic growth," he said.
[As the economy picks up - LMAO - it is about to head into the gutter - if 9% gdp does not bring jobs what will? - mish]
But in the meantime, there are few signs of pressure on labor and capital resources that would point to a "worrisome increase" in inflation, said Moskow. He does not vote this year on the Fed's rotational interest-rate panel, but does participate in the policy meetings.
[no doubt Russ will be relieved to know that inflation has not yet reached the worry point. ggg Mish]
"While there is always the potential for imbalances in certain sectors, recent numbers confirm that inflation is still extremely low," he said.
[low inflation is confirmed - ggg - mish]
The Federal Reserve left interest rates at four-decade lows last week, as was widely expected. The panel's statement was largely unchanged from January in expressing the need to remain "patient" in removing the stimulus of low interest rates as long as "new hiring was lagging."
[Put it all together and you see the only thing that matter to the FED is jobs - mish]
In their recent public appearances, the Fed has presented a united front for short-term policy to remain on hold. But minutes from the Jan. 28 policy meeting, also released last week, showed that members were already then in a deep debate about the near-term course for the economy and over how to condition financial markets for an eventual rate change.
Moskow's is the first of a series of Fed speeches this week, from which financial markets hope to divine more clues on the timing of an eventual rate hike.
On jobs, Moskow acknowledged that the unemployment rate is trending lower, but employment growth is still disappointing. Payrolls are still more than 2 million jobs below their peak in March 2001 and companies have said they remain committed to controlling costs and increasing productivity.
"Companies would like to see a longer trail of sales and earnings growth before expanding their work forces," he told the group. "As a result, even though layoffs are down, new hiring has taken longer to pick up than it has in the past."
He thinks productivity gains to date, tax cuts, expectations for continued gains in capital spending, and improving economies abroad are among the factors that will lead to increased hiring.
[And I think he is nuts. mish]
"Many of our business contacts have indicated that they will have to hire soon if demand holds up. So, I am optimistic that employment will accelerate, because I believe that economic growth will remain solid," he said.
[Some businesses will hire 3 workers bit other will lay off 1,000 - these idiots can not figure this out or are just telling fat lies. Are they liars or stupid? which is it? mish]
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