Fox Business News is reporting today that?Boston Federal Reserve President Eric Rosengren spoke with FOX Business Network?s (FBN) Peter Barnes about the United States economy. Rosengren spoke about deflation saying, ?I think it?s very unlikely in the United States? and ?that?s one reason for getting back to the 2 percent inflation target.? Rosengren also spoke about the end of quantitative easing saying, ?it was appropriate.? The condition for ending our bond purchase program, or the so-called quantitative easing, was that we had made substantial improvement in labor markets.? I think we have met that.?
On deflation:
?I think it?s very unlikely in the United States, that that?s something we will experience. But Japan has had a problem over the last two decades and they found it very difficult to exit from having the general price level falling.? And Europe has very low inflation rate now, and I think they do have some risk of deflation and that?s one reason why they?re talking about taking more aggressive monetary policy. At the same time, we?re talking about possibly removing accommodation over the course of the next year or two.?
On the imminent deflation front in the US:
?I certainly don?t expect that in the United States, but that?s one reason for getting back to the 2 percent inflation target.? You don?t want to have too low inflation, just like you don?t want to have too high inflation.? The reason — one of the reasons you?re concerned about too low inflation is you don?t want unpleasant surprise to cause you to start actually having falling prices.?
On supporting the end of quantitative easing:
?It was appropriate.? The condition for ending our bond purchase program, or the so-called quantitative easing, was that we had made substantial improvement in labor markets.? I think we have met that.? The unemployment rate now is 5.8 percent; it?s much lower than it was at the outset of the program, so I think the program?s largely been successful and it was appropriate to start going to a less accommodative monetary policy.?
On raising interest rates going forward:
?There are two things we want.? We want to get the economy back to full employment and my own estimate of that is 5.25 percent, and we want the inflation rate to trend up to 2 percent.? So recently the inflation rate?s been a good bit below that; it?s currently at 1.4 percent.? So we?re not quite hitting our target and I?d like to see more evidence that we?re likely to do so in a one to two year time frame. You should have a data dependent policy and that implies that we don?t go by calendar days but instead focus on getting back to full employment, getting inflation back to 2 percent.?
On the recent job report Friday:
?It was a good employment report.? We?re continuing to make relatively slow but steady progress, so the unemployment rate has been coming down.? That?s obviously good news.? Probably even better news was we?re continuing to get payroll employment growth of over 200,000 jobs a month.? That?s pretty strong growth, given how quickly the labor force is growing.? So if we continue to get that, we should get continued improvement in labor markets.?
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