Federal Reserve Governor Sarah Bloom Raskin said she sees signs the U.S. economic recovery may be strengthening while still having a “long way to go.”
“Some economic news has been encouraging and may be suggesting that the pace of the recovery is picking up,” Raskin said today in the text of a speech in Los Angeles. “Even though general economic activity and labor-market conditions have improved modestly in the past two and a half years or so, house prices have continued to trend down.”
Fed officials disagree over whether the benchmark interest rate should stay low through at least late 2014, a plan that the Federal Open Market Committee endorsed last month. Minneapolis Fed President Narayana Kocherlakota said today improvements in the economy may warrant a policy tightening as early as this year. Vice Chairman Janet Yellen and New York Fed President William C. Dudley said borrowing costs will need to stay low through late 2014 to foster a revival in the job market.
“It is an understatement to say that these are profoundly challenging times for millions of Americans,” Raskin, 50, said at the San Francisco Fed’s business and community leaders luncheon.
Stocks rallied today after Yellen and Dudley’s remarks fueled speculation that the central bank will ease policy if the economy needed it. The Standard & Poor’s 500 Index rose 1.4 percent to 1,387.57.
Stimulus If Needed
Policy makers at their March 13 meeting favored more stimulus only if growth faltered or inflation was below the Fed’s 2 percent target, according to minutes of the meeting.
Employers added 120,000 jobs in March, marking the slowest pace of job creation in five months, Labor Department figures showed last week. Also, jobless claims reached a two-month high in the week ended April 7, according to a report released today.
Still, the Fed said in its Beige Book business survey released yesterday that the economy continued to grow at a “modest to moderate pace” from mid-February to late-March.
Raskin today also acknowledged the limitations of the central bank, saying that “other actors” must also contribute to foster growth.
“One perspective to keep in mind is that the Federal Reserve can’t do it all,” she said in response to a question from the audience. “We have done a very significant job in lowering interest rates -- both short-term and long-term -- and keeping it low, but that’s about all we can do in terms of more directly affecting economic activity.”