Top takeaways from President Rosengren’s March 5 talk
Offers “relatively strong forecast”; explores risks to that outlook
Boston Fed President Eric Rosengren spoke today to the National Association of Corporate Directors, New England Chapter, in Boston. Here are the top takeaways from his talk.
Offered “relatively strong” forecast for the economy in 2019
Rosengren projected economic growth somewhat above 2 percent, inflation close to the Fed’s 2 percent target, and continued tightening in the labor market.
“Financial markets have stabilized, and stock prices have recovered from their December lows. Concerns about government shutdowns are diminished, and there appears to be more optimism relative to trade disputes,” he said. “While labor markets are tight and wage pressures are rising, inflation is so far quite well behaved.”
Highlighted increased risks to the economic outlook
Rosengren said financial markets have “recovered smartly” from the fourth quarter of 2018, which saw drops in stock indices, rising stock volatility, falling oil prices, dropping long Treasury rates, and widening credit spreads.
“However, many of the underlying global growth issues that generated the recent spate of financial-market concerns are as yet unresolved,” Rosengren said. These issues include slowing growth in China and Europe, constraints on international trade, the potential for Brexit-generated challenges, and problems at some European banks.
Counseled patience before further monetary policy action
Rosengren said it remains to be seen if signs of economic weakness at the end of 2018 reflect an underlying slowdown or were a response to “temporary concerns that may fade.” He noted that inflation is near the Fed target and that worries the economy may overheat have eased.
“Together these factors are sufficient to justify a pause in the recent monetary tightening cycle,” Rosengren said. “In the face of heightened risks, policymakers can be patient,” waiting to better discern the direction of the economy before taking further monetary policy action.