Labor market slack data show the U.S. economy remains "very far from historical average levels of labor utilization," and therefore monetary policy should stay highly accommodative, Federal Reserve Bank of Boston President & Chief Executive Officer Eric S. Rosengren said Thursday.
"The implications for monetary policy seem clear - if one believes some of the signals from the broader measures of labor market slack that I have walked you through today, then we remain very far from historical average levels of labor utilization," Rosengren said according to prepared text of remarks he was to deliver at New College of Florida. "As a result, I firmly believe that monetary policymakers should remain quite patient in removing accommodation."
That belief is backed by the Federal Open Market Committee, which stated that it "expects short-term interest rates to remain low well past the time that the unemployment rate declines below the 6.5 percent threshold."
With inflation below expectations and the Fed's 2% target, and "in light of too much labor market slack and very low inflation rates, monetary policy should continue to be highly accommodative," Rosengren said.
