US Economy: Not to Hot, Not to Cold, Just Right

US Economy: Not to Hot, Not to Cold, Just Right

US Economy: Not to Hot, Not to Cold, Just Right

The US with steady growth, low unemployment and tame inflation, the nation is experiencing a “Goldilocks” economy: Not too hot. Not too cold. But just right.

That from a Top Fed official Friday, who suggested that the unemployment rate could fall further to 3.5% with inflation modestly overshooting the Fed’s target for a time without raising concerns.

John Williams, the President of the Fed’s San Francisco regional bank, said that he still expects a gradual pace of 3 to 4 fed funds increases this year.

He spoke to reporters on TV after the Commerce Department reported that the unemployment rate fell to 3.9% in April, the lowest mark in 18 years, with 164,000 jobs created.

“I feel this is pretty much a Goldilocks economy,” Mr. Williams said, noting the strong labor market and moderate gains in wages and inflation. “I see this as all pretty positive.”

Mr. Williams will be moving next month to take over as president of the Fed’s most influential regional bank in New York.

He is a voter on the FOMC, the panel of Fed board members and regional bank Presidents who set interest rates.

As President of the New York Fed, he will have a permanent vote and will serve as the FOMC’s Vice Cairman, as he succees William Dudley, who is retiring from the central bank in June.

Mr. Williams, a PhD economist and the former research director of the San Francisco Fed, is being viewed as part of the brain trust that Fed Chairman Jerome Powell, a non-economist, will rely on in setting monetary policy.

Mr. Williams, one of several Fed officials who spoke Friday at a policy conference at Stanford University, said that he was not concerned that unemployment has now fallen below 4% with inflation rising.

At its meeting last Wednesday, the Fed left its Key policy rate unchanged at a still-low level of 1.5 to 1.75%. The Fed did hike the rate in March and many economists expect the central bank to move again at the June meeting.

Many economists believe that the US is now at full employment, Mr. Williams said he could see the jobless rate dropping further to around 3.5%, with the central bank “modestly overshooting” its 2% target for inflation for a time given that the Fed had failed for a number of years after the Great Recession to achieve the 2% inflation goal.

“I am personally comfortable with the fact that inflation may overshoot that 2% for a while,” he said.

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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