WASHINGTON — Boston Federal Reserve Bank President Eric Rosengren Tuesday declared his dissatisfaction with the current pace of jobs growth in the United States, indicating he might not be ready to support scaling back the Fed's aggressive bond buying aimed at spurring the recovery.
The Fed needs to assess how sustainable the improvement seen so far in the labor markets really is, Rosengren said in an interview on CNBC, and noted that the pace of economic growth over the course of the recovery has only been at 2.2%.
"It has meant that the improvement in employment, and improvement in labor markets has been slower than I'd like to see," he said.
Rosengren, a voter on the Fed's policymaking Federal Open Market Committee this year, said he expects growth of 2%, "or a little bit above," for the second half of the year, again "still substantially slower than I'd like to see."
Echoing remarks he made Monday evening in a speech in Boston, he stressed that, "We need to see growth much closer to 3% than 2% if we really want to get to full employment in a reasonable time period."
The Fed will want to be confident that 3% growth will become the norm, he said, adding that "we may be seeing that fairly soon." He said he expects to start seeing better economic data at the beginning of next year, and growth closer to 3%.
Rosengren reiterated that there is a distinction between the monetary policy tools at the Fed's disposal, stating that is likely the central bank's decisions with regards to its asset purchases will be separate from how long interest rates are kept close to zero.
"So just because we decide at some point that we should reduce the amount of purchases that we make in long-term securities, doesn't necessarily mean we change when we raise the short-term rates," he said.
Currently, the FOMC is saying the target interest rate will need to remain at exceptionally low levels so long as unemployment is above 6.5% and inflation does not threaten to exceed 2.5%.
Rosengren said he expects "the fed funds rate is going to remain low for quite some time. We are going to have to see much faster growth than what we are currently anticipating before it makes sense to raise short-term rates."
He predicted inflation will still be very low even when the 6.5% unemployment threshold is reached, "and as a result we are not going to need to be in much of a hurry to raise short-term rates."
The first rate hike by the Fed will be data-dependent, he added, saying that relatively slow growth in the overall economy might mean no action until 2016.
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