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John Berry、Fedはまだ金利を上げないと読む(Bloomberg)

Fed Is Likely Many Months From Raising Rates

John M. Berry

April 16 (Bloomberg) -- Federal Reserve officials likely remain many months away from any decision to raise their 1 percent target for overnight interest rates.

Recent data for March showing a strong payroll gain and unexpectedly sharp increases in retail sales and consumer prices have caused some analysts to predict a Fed rate move soon. One, speaking on CNBC this week, even said the Federal Open Market Committee would raise rates at its next meeting, May 4.

Recent data for March showing a strong payroll gain and unexpectedly sharp increases in retail sales and consumer prices have caused some analysts to predict a Fed rate move soon. One, speaking on CNBC this week, even said the Federal Open Market Committee would raise rates at its next meeting, May 4.

The reality is that Fed officials will need far more than a month or two of good payroll numbers and a month or two of figures showing rising inflation rates before they are ready to act.

Analysts ``always tend to make too much of a few numbers'' said Gary Stern, president of the Minneapolis Federal Reserve Bank, in an interview last week. ``We are not going to get carried away'' by two or three months' worth of numbers in either direction.

Fed Vice Chairman Roger W. Ferguson Jr. conveyed the same message in a speech in San Francisco last week.

Ferguson said that the 308,000 increase in payroll jobs in March ``was encouraging'' and the expectation by economic forecasters that employment will continue to improve is ``a reasonable assessment.''

Hiring Could Fall Short

``Nonetheless,'' he cautioned, ``one cannot definitively rule out the possibility that hiring will fall short of expectations over the next several months as it had up until the most recent report. In particular, the lackluster performance we have seen in the labor market, even as real GDP has been moving up strongly, raises the question of whether an unusually large portion of the job cuts implemented by firms in recent years represent permanent layoffs that will only gradually be offset by job creation elsewhere in the economy.''

The words of Stern and Ferguson aren't those of policy makers about to pull the trigger on a rate increase anytime soon. Nor is there any reason to think that their analysis isn't generally shared by most other FOMC members.

While Stern isn't a voting member of the committee this year, he otherwise participates fully in the meetings, and his views and those of other non-voting reserve bank presidents carry as much weight as that of those who do vote.

Not Ignoring Data

None of this means Fed officials are ignoring any incoming data. The March payroll figures eased a concern that even with all the monetary and fiscal stimulus flowing into the economy, growth might falter once more.

On the other hand, with interest rates so low, policy makers know they don't have a lot of traditional ammunition left to use if growth isn't sustained at a healthy pace.

So, in Fed Chairman Alan Greenspan's risk-management approach, the cost of being wrong on the downside would be much higher than if growth and inflation were to exceed expectations. And with inflation so low, the officials have been and are still willing to wait to raise rates until the evidence of the need to do so is unmistakably clear.

As Stern put it, ``Once you have achieved price stability, you don't want inflation to go lower.''

In terms of assessing the outlook for inflation, Fed officials tend to look at fundamentals, particularly the trend in unit labor costs, which represent about 70 percent of all costs for an average U.S. company. For non-farm businesses, unit labor costs fell 1.2 percent last year after being down 2.4 percent in 2002. Moreover, they probably dropped a bit more in the first quarter of this year.

`Benign' Inflation Outlook

With labor costs falling, growth in other industrial countries sluggish and China and India rapidly expanding their production capacity, Stern said, ``I do think the inflation outlook is certainly benign for the next year at least.''

Given his reasoning, it isn't likely he has changed that view since the release of the March consumer price index.

Nevertheless, Greenspan and probably every other Fed official who has spoken publicly in recent months have said that at some point they will raise their 1 percent target, which is much too low to be consistent with continued low inflation and a healthy economy operating close to its potential.

Well before that happens, Fed officials undoubtedly will begin to recognize how the economic landscape is gradually changing and moving them toward a higher rate.

The May 4 Meeting

The first such change could appear in the FOMC statement issued after the May 4 meeting. In their description of the economy, the officials certainly will note the improvement in the payroll figures, and probably that inflation appears to have stabilized.

In keeping with the latter point, the committee may also decide it's time to say that the risk of a further decline in inflation is now balanced with that of a rise in inflation.

Some analysts expect the FOMC to drop the language saying the committee ``believes that it can be patient in removing its policy accommodation.'' That seems much less likely.

When It Raises Rates

Perhaps the key thing to keep in mind about Fed policy in coming months is this: Unlike any other time since the early 1960s, when it starts to raise rates, the central bank won't have in mind the goal of reducing inflation. It will only want to keep it at a low level, and many if not all of the policy makers would actually be a bit more comfortable with an inflation rate closer to 2 percent than 1 percent.

That means that the Fed not only will have been patient about when it starts to raise rates, but it may also choose to be patient about how fast and how far it raises them, though that will depend what policy makers see happening after the first rate increase.

Greenspan's testimony before Congress' Joint Economic Committee on Wednesday may help clarify some of the Fed's intentions.

Last Updated: April 16, 2004 00:02 EDT

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