Friday October 23, 1:29 pm Eastern Time
Chicago Fed Moskow sees risk US growth slows fast
NEW YORK, Oct 23 (Reuters) - Federal Reserve Bank of Chicago President Michael Moskow said on Friday there is a risk
the U.S. economy may slow too fast going into 1999 due to the adverse impact of overseas problems and domestic financial
markets woes.
''The risk, and it's only a risk at this point, is that this (economic) slowing will be too quick,'' Moskow told a banking forum in
Indianapolis, in a speech also available in New York.
Moskow noted ''financial market volatilities have already reduced consumer wealth substantially,'' while higher financing costs are also restricting business
investments.
With both consumer and business spending expected to slow dowm, ''it will be difficult for the components of aggregate demand that strongly propelled the U.S.
economy in 1996, 1997, and the first half of 1998, to continue to drive growth rates of spending at their previous extraordinarily high rates of increases,'' Moskow
said of a 2-1/2-year period where U.S. GDP growth exceeded 3-3/4 percent.
The Chicago Fed president added such considerations led the Fed to ease credit at a regular policy meeting on September 29 and again with an inter-meeting move
on October 15.
Moskow said the two interest rate cuts were a ''moderate change in policy'' that ''would be consistent with achieving the Fed's goal of low inflation and sustainable
economic growth.''
Looking forward, Moskow acknowledged a certain degree of uncertainty remained, mainly because ''the full extent of the aftershocks to our domestic economy
(from foreign developments) is hard to gauge.''
He cited the downward revision in the International Monetary Fund (IMF) forecast for 1999 world growth to 2.5 percent from 3.7 percent.
The Chicago Fed president also remakred on uneasiness in the U.S. financial sector as ''Federal Reserve surveys indicate that banks are less willing to lend to some
borrowers.''
''Financial market volatilities have already reduced consumer wealth substantially and continuing pressures on corporate profit margins and widening risk spreads
have increased the cost of capital investment,'' he also said. |
