Fed’s Rosengren Says Job Growth Too Slow to Remove Stimulus
Federal Reserve Bank of Boston President Eric Rosengren
Brendan Hoffman/Bloomberg
Eric Rosengren, president of the Federal Reserve Bank of Boston.
Eric Rosengren, president of the Federal Reserve Bank of Boston. Photographer: Brendan Hoffman/Bloomberg
May 5 (Bloomberg) -- Federal Reserve Bank of Boston President Eric Rosengren says the economy isn't gowing fast enough to achieve the central bank's goals of full employment and stable prices, and that "nothing's off the table" if the outlook deteriorates. Sara Eisen reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Federal Reserve Bank of Boston President Eric Rosengren said the economy isn’t growing fast enough to achieve the central bank’s goals of full employment and stable prices, and that “nothing’s off the table” if the outlook deteriorates.
“I’d like to see growth that’s strong enough to generate jobs at a faster rate than 200,000” a month, Rosengren said in an interview with Bloomberg Television to air tomorrow. For interest rates to rise, “we’d have to see much more job growth than we’ve seen to date.”
Fed Chairman Ben S. Bernanke and his colleagues on the Federal Open Market Committee said last week that the economy, which has added an average of 149,000 jobs a month over the last six months, is recovering at a “moderate pace.” For Rosengren, the labor-market recovery is insufficient to begin contemplating a removal of stimulus.
“We have an unemployment rate at 8.8 percent and in the longer run we’d expect something closer to 5 to 6 percent,” Rosengren said. “We’re well above where we would expect to be over a four- or five-year period, so we need to stimulate the economy enough to get much more job growth.”
The unemployment rate dropped to 8.8 percent in March from 9.8 percent in November, the month the Fed began its $600 billion bond-purchase program to boost the recovery and stave off deflation.
The Labor Department will probably report on May 6 that the jobless rate was unchanged in April and 185,000 jobs were added to payrolls, according to the median estimates in a Bloomberg survey. A report today from ADP Employer Services estimated companies added 179,000 workers in April.
Far From Targets
“Right now we’re pretty far away from our targets, and right now we’re keeping monetary policy accommodative,” Rosengren said. “It’s very appropriate given how far we are from our targets.”
The interview was filmed on the 31st floor of the regional bank’s downtown headquarters overlooking Boston’s financial district to the west and what is believed to be the site of the Boston Tea Party to the east.
Rosengren, 53, joined the Boston Fed as an economist in 1985 and became its president in 2007. Fed presidents rotate voting on monetary policy, with Rosengren next voting in 2013. At the Fed’s December 2007 meeting, he became the only currently serving policy maker to dissent from an FOMC decision in favor of more accommodative policy.
‘Whatever Makes Sense’
Asked whether a third round of quantitative easing policy was still under consideration, Rosengren said that “nothing’s off the table, it depends on economic conditions, so we have to do whatever makes sense given our outlook for the economy.”
“If we were to see inflation rates going down dramatically and the unemployment rate going up dramatically, we’d have to reexamine what our monetary policy is,” he said. “That’s not something I expect, that’s not something that’s in most people’s forecasts.”
By the end of 2011, Rosengren expects unemployment to fall “a little below 8.5 percent.” That is in the center of FOMC forecasts in April, released last week, showing most Fed policy makers expect unemployment of 8.4 percent to 8.7 percent at the end of the year. “That’s not as good as I’d like to see. That’s very slow progress in labor markets,” Rosengren said.
In a speech today in Boston and in the interview, Rosengren emphasized his view that the current rise in inflation was likely to be “transitory.” Raising interest rates to temper the increase in commodity prices would “likely make the impact of the shocks worse for households and businesses,” he said in his speech.
Longer-run inflation expectations, as measured by the spread between Treasury Inflation Protected Securities and nominal bonds, show investors expect inflation of 3.03 percent in five to 10 years, up from 2 percent as recently as August.
Rosengren said expectations are still well anchored.
“One way you would see inflation expectations manifest themselves is through higher wages and salaries,” he said. “We’re not seeing that today.”
To contact the reporter on this story: Joshua Zumbrun in Boston at jzumbrun@bloomberg.net;
Sara Eisen in New York at seisen2@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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