Fed's Broaddus counsels patience on economy, inflation -
Friday, April 16, 2004 4:27:34 PM
CAMBRIDGE, Md. (AFX) -- More confirmation that the U.S. economy is on a strong growth path is needed before the central bank should consider hiking interest rates, Richmond Federal Reserve Bank President J. Alfred Broaddus said Friday
"We are now going to need to watch carefully the incoming information on the strength of the expansion," Broaddus told reporters after a speech here. Broaddus is a nonvoting member of the Federal Open Market Committee, which sets U.S. monetary policy
"I think this is a period when we want confirmation," he said
Economic reports over the last month have indicated that the economy is strengthening and that the period of super-low inflation may be coming to an end, but he said this was "still a limited amount of information" for policymakers to work with
The Federal Reserve can "wait at least a little longer before we make judgments about whether or not the improvement we have seen in the March data is going to persist," he said
Broaddus said the consensus forecast that the economy would continue on a solid growth path is "pretty high," adding: "We can't be sure yet." Broaddus also said he was actually happy to see the strong inflation signals in the . It "reinforces my confidence that ... the period of disinflation may be coming to an end and inflation may be bottoming out and that is good in the sense that much more disinflation could easily become problematic." "It makes me a little uncomfortable to say I'm happy to see higher inflation -- obviously, we can't allow that inflation rate to get beyond a rate we are comfortable with," he said
Broaddus said he believes the U.S. economy is still "some distance" from an upturn in inflation. If the Fed saw that inflation was not just bottoming out but was on an "upward creep," it would be essential that the Fed act
"We are still some distance from that. I personally don't see a strong problem there," he said, asserting that there's still considerable slack in the labor markets
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