Despite low gross domestic product growth, and without offering a timetable, Federal Reserve Bank of Boston President & Chief Executive Officer Eric S. Rosengren Friday called for gradual interest rate hikes, which he said would prolong the recovery.
"My personal view, based on data that we have received to date, is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy," Rosengren told a group in Quincy, Mass., according to prepared text released by the Fed
Calling real GDP growth so far this year "disappointing," Rosengren attributed the weakness, in part, to "temporary inventory adjustments that are likely to be reversed in the second half of this year."
GDP growth, he suggested, will be greater than 2% in each of the next two quarters.
While global issues remain a headwind, Rosengren said, "market indicators have so far provided little evidence of outsized risks."
While these forces provide short-term downside risk to the economy, the U.S. "has been relatively resistant to shocks from abroad of late, as evidenced recently by the aftermath of the Brexit vote."
Rosengren noted risk to the upside. "It is important to note that an overheated economy – one that significantly exceeds sustainable output and employment – would pose risks to maintaining full employment over time."
"A second risk of waiting too long to tighten is that some asset markets become too ebullient," he said.
