Fed's Rosengren warns of risks to central bank's 'almost ideal' economic outlook
HARTFORD, Conn - U.S. Federal Reserve policymakers are forecasting an “almost ideal” outcome in 2020 where the U.S. labor market will stay strong and inflation will approach the central bank’s 2% target, but officials should remember to consider potential risks, Boston Federal Reserve Bank President Eric Rosengren said on Monday.
“Central bankers do not have much historical experience with extended periods where interest rates are running below the estimated equilibrium level while unemployment rates are, simultaneously, historically low,” Rosengren said. “So we want to be alert to any potential risks emerging.” Fed officials voted unanimously to keep interest rates unchanged at the December policy meeting and policymakers sent a strong signal that rates are likely to stay at current levels for the time being.Policymakers expect the unemployment rate to stay below 4% in the range seen last year, Rosengren said. But with interest rates also low, there is a chance that the labor market could reach “unsustainable levels,” causing wages and inflation to grow more quickly than expected, he said.
Despite the optimistic outlook for the job market, Rosengren said trade negotiations and the presidential election could create more uncertainty and put a damper on business investment.
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