Eric Rosengren Thinks It Would Be Appropriate To Start Raising Rates By The End Of The Year

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Boston Federal Reserve President Eric Rosengren spoke with FOX Business Network’s (FBN) Peter Barnes about when the Federal Reserve will raise interest rates. Rosengren said, “I actually think it would be appropriate to start raising rates by the end of the year if we continue to get positive data” and that “I think that seems like a reasonable forecast.”

Eric Rosengren on when the Fed is going to start raising interest rates:

“Well, as you know, we didn’t do it in September.  I was very supportive of not doing it in  September.  The reason for that is there was a lot of instability in terms of what was happening in China and many of the emerging markets, so we needed time to process exactly what was happening.  I think the data that we’ve got since end of August actually has been pretty positive, that U.S. economy looks like it is not going to have a large imprint from what has been going on internationally, at least to date. If that continues, 13 of 17 people that vote on monetary policy and participate in the meetings think that by the end of the year it is likely that we will be raising rates and I think that seems like a reasonable forecast.  So they have fourth quarter, and this is the fourth quarter, so it’s likely to happen soon.”

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Eric Rosengren on whether the data is there to raise rates in October or wait until December:

“Well as you know, we are getting an employment report at 8:30, so there is still some data that’s coming in that I think will be relevant for the next several meetings so we do need to monitor what is happening with the data. I would say since August not that much data has come out that would indicate that we have problems, but I think a little bit more data would be useful to make sure that some of the problems going on internationally don’t have an impact on domestic data.”

Eric Rosengren on whether he would like to wait until 2016 to raise rates:

“Actually, I think if the data keeps coming in as it has been and indicates that the unemployment rate right now is at 5.1 percent, we will see with today’s employment report where the unemployment rate is. We’ve had fairly strong payroll employment, that I actually think it would be appropriate to start raising rates by the end of the year if we continue to get positive data.  That is my expectation that we will get positive data. I think many other participants in the meeting are expecting to continue to have a strong U.S. economy, and as long as the U.S. economy is continuing to improve, and we think labor markets will tighten up, it will be appropriate to start raising rates sometime this quarter.”

Eric Rosengren on whether the global turmoil is slowing down the economy:

“So the trade data has been weak.  You kind of expect that, given that the exchange rate is quite strong, many of our trading partners are weak right now and that actually has shown up when I travel around New England and talk to businesses, those companies that are trying to export abroad are having more difficulty with the strong dollar, so that is having an impact.  But the more straight domestic data I would say has actually been reasonably positive. The consumption data looks like it is continuing to do well, which means that consumers have not been thrown off by what is happening internationally. And so as long as domestic factors don’t look like they are being significantly impacted by what’s happening abroad, I think it will be appropriate to tighten sometime over the course of this year.”

Eric Rosengren on the manufacturing data:

“So we look at a wide range of data. Manufacturing data is important.  I think the trade data and the manufacturing data are highly correlated, so many of the manufactures that are having some difficulties and some slowdown are reflecting the fact that we’re not exporting the way we would be if the dollar wasn’t as strong as it currently is and if our trading partners were doing a little bit better than they have been. So I think the manufacturing data is very consistent with the trade data, consumption residential investment, some of the other components are also important and they’re particularly important to see if there is spillover from what has been going on abroad to the United States. I’d say to date we haven’t strong evidence in the data that there has been a strong imprint in the domestic data.”

Eric Rosengren on whether data doesn’t support a rate increase by December should it get pushed off until 2016:

“We should do what is appropriate.  So depending on how the data comes in, if we are reasonably confident inflation is going to go to 2 percent and we see further improvement in labor markets, then we should be tightening sometime over the course of this year. If those conditions are not met, we should wait. “

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