MNI POLICY: Fed's Rosengren: Pause for Next Several Meetings

By Jean Yung

     WASHINGTON (MNI) - Federal Reserve Bank of Boston President Eric Rosengren

on Tuesday said the FOMC should wait through "several" meetings before making a

call on the next policy move. Weakness in financial markets at the turn of the

year may or may not reflect slowing in the real economy, while slowing growth

abroad and ongoing trade tensions remain unresolved, he said. 

     "With less ebullience in financial markets and no immediate signs of

inflationary pressures, patiently watching to see how the economy develops is

the appropriate policy for now, and represents prudent management of risks to

the forecast," he said. 

     "It may be several meetings of the Federal Open Market Committee before Fed

policymakers have a clearer read on whether the risks are becoming reality --

and by how much the economy will slow compared to last year."  

     The following are other key points from Rosengren's remarks prepared for

the National Association of Corporate Directors in Boston: 

     --His baseline forecast is "relatively strong" with growth somewhat above

2%, inflation very close to the Fed's 2% target and a labor market that

continues to tighten somewhat. But risks to the outlook are somewhat greater

than previously. 

     --Equity prices have recovered since the turn of the year, but continue to

price in downside risks to the economy. 

     --There is some indication in the December retail sales data that the

economy may be slowing a bit faster than policymakers anticipated. 

     --Many of the global growth issues that drove recent financial market

volatility are "as yet unresolved" and could weigh on an already slowing

economy. These issues include slowing growth in China and Europe, constraints on

international trade, the potential for Brexit-generated challenges, and problems

at some European banks.

     --With inflation so far "well behaved" and financial stability risks

reduced, "there is less reason to fear overheating." 

     --No mention of balance sheet policy.

     Rosengren votes on rates this year. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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