US central bankers optimistic on economy

  • Business
  • Saturday, 24 Apr 2004

NEW YORK: US central bankers expressed optimism about the economy on Thursday and said inflation was under control, but one key official worried that a recent rebound in the job market was still fragile. 

Federal Reserve governor Susan Bies said the US economy was poised for robust growth and inflation pressures were subdued enough to give the central bank some leeway before raising interest rates. 

Ben Bernanke, another Fed governor, seemed unconcerned about the potential for sharp price increases, but he sought to temper optimism that hiring may be picking up rapidly. 

“The labour market has been improving, but it is still at a relatively early stage and, therefore, perhaps a bit fragile,” Bernanke told reporters after a speech at a Bond Market Association conference. 

The influential central banker said he would want to see steady declines in the unemployment rate and improvements in other job indicators to be convinced that the economic recovery was sustainable. 

Bies appeared more upbeat on the job outlook. She welcomed a report earlier this month that showed US employers added 308,000 workers to their payrolls in March, the biggest gain in four years and one that broke a trend of unusually sluggish employment growth. 

“I am cautiously optimistic that job growth will pick up further over the remainder of the year,” she said. “My business contacts tell me that companies have become more optimistic about economic prospects and their plans do include increases in the size of their payrolls,” she said. 

But Bernanke argued that because many discouraged Americans had stopped looking for work, the current 5.7% jobless rate understated the true level of unemployment in the US economy. 

As the situation improves and people begin streaming back into the labour market, he said, much faster job growth would be required to absorb new entrants. 

The timing of an eventual rise in US interest rates, Bernanke said, would depend on further evidence that the job market was recovering and that companies were beginning to charge higher prices for their goods. 

Financial markets widely expect the Fed to begin raising its 1% federal funds rate this summer, although some economists believe rates will remain on hold till 2005. – Reuters  

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