Fed officials see slow recovery for labor market
Written on September 10, 2009
U.S. labor markets could take years to recover from the setbacks of the current recession, which have pushed the unemployment rate to a 26-year high, top Federal Reserve policy-makers said on Wednesday.
But the officials said the Fed may need to end its ultra-accommodative policy stance long before the jobless rate starts to plummet if inflation starts to rise.
For now, though, that seems some way off given the tentative nature of the economic recovery.
“Given the lag between the time monetary policy is initiated and when it impacts the economy, that wind-down process needs to begin as soon as there are convincing signs that economic growth is gaining traction,” Dallas Federal Reserve Bank president Richard Fisher told a meeting of the North Dallas Chamber of Commerce.
It would be hard to determine just when that time would be though, Fisher said. “It all depends on the economy,” he told reporters after the event.
Speaking in New York, Chicago Federal Reserve president Charles Evans became the latest Fed official to suggest that the languid pace of the 2004-2005 policy tightening would not be repeated.
Although rate hikes are still some time off, “as the economy continues to improve, and when we see rising inflation pressures, Fed policy will respond aggressively,” Evans said free credit scores.
Evans is a Federal Open Market Committee voting member in 2009, but will be off the voting rotation in 2010, when financial dealers guess the first rate hikes could come.
HALF OF REGIONAL FEDS CITE IMPROVEMENT
Also on Wednesday, the Fed issued its Beige Book survey, an anecdotal overview of the U.S. economy.
Half of the Fed’s 12 districts — Dallas, Boston, Richmond,
Cleveland, Philadelphia and San Francisco — saw evidence the economy had improved by the end of August, although labor markets remained weak and retail sales were flat.
Most districts noted that the outlook for economic activity among their business contacts was cautiously positive.
“The report was quite consistent with the recent dataflow, noting upside from manufacturing and residential real estate but continued weakness from commercial real estate and sluggish consumer spending,” Michelle Meyer, economist at Barclays Capital, said in a note to clients.
FISHER: WRESTLE BALANCE SHEET DOWN
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