Economic growth “remains disappointingly slow,” with continued “significant downside risks,” and if growth slows greatly, “more policy accommodation could be advisable,” Federal Reserve Bank of Boston president and chief executive Eric S. Rosengren said Tuesday.
He added that monetary policy should stay accommodative until the Fed’s dual mandate can be met in the near future.
“Financial-market and economic conditions have been improving since the start of the year,” Rosengren told the National Institute of Economic and Social Research. “Central banks have played an important role in encouraging more economic growth. In the United States, accommodative monetary policy has been essential to improving financial conditions, but growth remains disappointingly slow to date, and significant downside risks remain. Should growth slow down more than is expected, more policy accommodation could be advisable.”
Without better real gross-domestic product growth and decreased jobless rates, “monetary policy may need to be more accommodative,” he said. With unemployment too high and inflation likely to be below 2%, there remains “room for flexibility in the response of monetary policy as we receive additional information on current economic conditions.”
Even if growth improves more than expected, the United States “will likely remain far from what anyone would consider full employment, so in my view policy accommodation should only be removed once it is clear that the Fed’s dual mandate can be achieved within a reasonable period of time,” Rosengren said.