MNI POLICY: Rosengren: Hopefully A Slow Fed Year After Dissent

By Evan Ryser

     NEW YORK (MNI) - Boston Federal Reserve President Eric Rosengren preferred

not to cut the policy rate three times in 2019 but he is now prepared to wait

and allow inflation to move up to the Fed's target. 

     "I would prefer probably a different level of rates but given that we are

here and given that we do have a goal ... of getting inflation up to 2%, I am

willing to wait until we get it closer to that target," Rosengren said in

remarks to The Forecasters Club of New York.

     Presenting his forecasts for next year, Rosengren sees growth at or above

trend in 2020 with strong labor markets but hopes to see higher wages and

prices. 

     "Hopefully this is going to be a boring year for monetary policy,"

Rosengren said. 

     "This is a very good time to be patient," Rosengren said. "We just cut

three times and monetary policy works with lags. There is no reason not to sit

back and see what actually happens over the next couple of quarters."

     Speaking at the Cornell Club, Rosengren said he expects inflation numbers

to get closer to target "probably by the springtime." 

     Rosengren expressed concerns about a potential build-up of financial risks

in the low-rate environment and firms' reach for yield. Those risks were behind

his dissent in the three rate cuts in 2019. "We are not well-equipped for an

extended period of low rates," he said.

     While a recent Fed paper suggested the neutral rate of interest known as

r-star may be negative, Rosengren said he didn't change his view of the neutral

rate this year, leaving it at 2.5%, including inflation. 

     "I don't think we currently have a negative r-star," Rosengren said.

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

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