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Having long ago converted from a dove to a hawk, this morning Boston Fed President (and non-voter in 2018) Eric Rosengren warned that the U.S. economy could be derailed in a "boom-bust scenario" as unemployment drops more than his Fed colleagues expect, and as the Fed falls further behind the curve of rising inflation.
In a Boston speech, Rosengren warned that overheating and trade disputes represent biggest short-term threats to continued U.S. expansion, although his own views "are that labor markets may tighten more than the median SEP forecast suggests, and that inflation is likely to increase a bit more than the current median forecast by FOMC participants."
Tightening - Median - Funds - Rate - Rosengren
"Therefore, I expect somewhat more tightening may end up being needed than is currently reflected in the projected median for the federal funds rate,” Rosengren warns, noting that the median from the Fed’s latest summary of economic projections is for three 2018 moves, including the hike made by the FOMC last month. This is to be expected, considering that Rosengren has previously hinted he is in the four-hike camp.
In his economic outlook, Rosengren projects unemployment will decline this year to 3.7% from current 4.1%; adds, “it is possible that unemployment will fall even more rapidly in the short-term."
Development - CBO - Data - Periods - Unemployment
To Rosengren this is a troubling development, and he cited CBO data showing periods of significant and persistent unemployment overshoot have corresponded with recessions in last half century. The Boston Fed president also said spillover effects from trade disputes could cause economic disruption wider than implied by the value of U.S. exports relative to GDP.
Some more highlights from his speech"
Economy - Term - Policy - Accommodation - Risks
"Unlikely that the economy would perform poorly in near term; monetary and fiscal policy remain accommodative, but accommodation may generate risks in long term"
"By using up so...
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