Pianalto: Unemployment And Caution Hinder Growth

Although the economy is showing early signs of recovery, two significant “headwinds” — the effects of unemployment and caution — will restrain growth, Federal Reserve Bank of Cleveland president Sandra Pianalto said yesterday.

The federal funds rate should remain “exceptionally low … for an extended period,” she told the Bonita Springs, Fla., Chamber of Commerce, according to a prepared text of her speech released by the Fed.

“Still, the time will come when it will be appropriate for us to begin removing some of our policy accommodation,” Pinalto said.

 “It is always a challenge to get the timing right, because our policy decisions have to be forward looking,” she added. “And the process will be more complicated than usual this time. The unprecedented actions we took to cope with the crisis have created conditions that make it harder to simply put the process in reverse.”

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