NEW YORK – Calling the recovery “frustratingly slow,” Federal Reserve Bank of Cleveland President and CEO Sandra Pianalto said Monday the pace of economic growth has picked up somewhat and inflation should remain around 2%.
“If our economy were a Kentucky thoroughbred, I’d say we have moved from a walk to a trot, but we’re far from a gallop,” Pianalto told a group in Lexington, Ky., according to prepared text of her remarks, released by the Fed. “The pace of growth is still frustratingly slow, and in a slow-growth economy, it is all the more difficult to generate the confidence that encourages people to expand their businesses, buy homes, and invest in activities that lead to more jobs, rising incomes, and reinvigorated communities.”
The economy should grow 2.5% this year and 3% next, which would mean four or five more years of the unemployment rate above the 6% rate she considers “consistent with maximum employment.”
While she expects inflation to “remain close to 2% on average for the next few years,” Pianalto said, “if gasoline prices continue to climb, that could complicate the inflation picture.”
She added, “Despite some evidence of progress in the labor markets, household finances, and banking conditions, the economy still faces a number of headwinds. Housing markets are still in distress throughout much of the country; state and local governments are still in the process of adjusting to budget pressures; and rising gasoline prices are likely to restrain household spending. Furthermore, strains in European financial markets continue to pose downside risks. For all of these reasons, businesses and households remain cautious about the future.”
