Fed´s Stern upbeat on economy and inflation outlook
Thursday, February 10, 2005 9:36:30 PM
afxpress.com
Fed's Stern upbeat on economy and inflation outlook WASHINGTON (AFX) - The U.S. economy is on a solid growth path with no sign of an uptick in inflation, said Gary Stern, the president of the Federal Reserve Bank of Minneapolis
"Overall, the stage is set for further economic expansion," Stern said in a speech to a business group in Helena, MT. Stern, who has been president of the Minneapolis Fed since 1985, is a voting member of the Federal Open Market Committee this year
Stern said he expected the economy to grow at a 3.5 percent to 4.0 percent growth rate over the next year or two. He added that consumer balance sheets are in "reasonably good shape," and employment is improving
"Financial market conditions still seem to me to be favorable for growth," Stern said. "We still have reasonably accommodative financial market conditions." He said inflation should remain modest. "I just don't see the signs - the ingredients- that would perhaps contribute to higher inflation
"There may be a few things around the edges that are worth worrying about if you really want to, but the preponderance of evidence suggests that inflation is going to stay modest," Stern said
A big advocate of inflation targeting Stern repeated his support for adoption of an inflation target by the Fed
Many central banks, including the Bank of England and the European Central Bank, have adopted inflation targets in recent years
The FOMC discussed inflation targeting at its two-day meeting earlier this month. Fed chief Alan Greenspan has opposed setting an inflation target in the past. But some economists said a target would give the Fed credibility after Fed chief Greenspan steps down next February
Stern said inflation-targeting could "institutionalize" the low-inflation approach that set the conditions for strong growth in the 1990s
"The value that I see in inflation targeting is that it would build upon and formalize what we have learned from our past success and failures in policy going forward," he said |
