U.S. growth may have lost some momentum and this poses questions about whether the slowdown is transitory or more entrenched, said Federal Reserve Governor Daniel Tarullo, becoming the latest official to voice concern over the outlook.
While harsh weather, a port strike and “residual seasonality” played a role in the economy’s first-quarter contraction, “I don’t actually think that those three factors combined can account for most of the decline in performance that actually led to negative GDP territory,” Tarullo told an Institute of International Finance event Thursday in New York.
Tarullo’s remarks follow a speech on Tuesday by fellow board Governor Lael Brainard, who argued for “watchful waiting” to clarify how the economy is coping with headwinds from abroad. The U.S. economy shrank by 0.7 percent at an annual rate in the first quarter.
Fed officials next meet to review policy on June 16-17. The Fed wants to allow readings on the economy to dictate when it begins raising interest rates for the first time since 2006. It will get an important update when May’s payroll report is released at 8:30 a.m. on Friday in Washington.
Earlier on Thursday, the International Monetary Fund urged the Fed to delay raising interest rates until the first half of 2016 and cut its forecast for U.S. growth. Investors currently expect the Fed to raise rates in December, according to bets placed in interest-rate futures markets.
“This is going to be a case where our data-dependent orientation is going to be particularly important, Tarullo said. ‘‘In a broader sense, there are more questions at this point in 2015 than there were at this point in 2014,’’ he added, describing the confidence with which economists upgraded assessments for 2014 after a weak start to that year, which he said had been missing this time around.
Disappointing consumer spending numbers and weaker capital expenditures this year are raising questions about whether the U.S. has ‘‘lost momentum in the underlying performance in the economy,’’ he said. On the other hand, auto sales have been a bright spot and a ‘‘lot of people’’ thought the housing sector was getting a bit more traction.
‘‘You could tell the story, as we sit here today, both ways,’’ he said. ‘‘That, literally, is what data dependence means here. We’re just going to have to wait and see. We’ll get another job number tomorrow morning,” he said. Economists polled by Bloomberg expect the economy added 225,000 jobs in May compared with 223,000 the month before.