U.S. Fed Officials Keep Quiet On Issue of Interest Rate Hikes
- By Knut Engelmann
- Jun. 08 2000 00:00
WASHINGTON -- U.S. Federal Reserve policy-makers said Tuesday the booming U.S. economy was on course for a soft landing but left financial markets wondering whether a yearlong barrage of interest rate rises is finally over.
Speaking at separate events around the country, two Fed board governors and one key regional Fed president took heart from recent signs of slowing in the economy's sizzling growth rate, even as they cautioned it was too early to tell whether that trend will last long enough to steady their hand.
Addressing the Boston Economics Club, Fed Governor Laurence Meyer said the central bank may still face the task of forcing the economy to a much lower rate of growth to wring out any remaining risk of higher inflation.
Meyer warned there was a danger of an inflationary spiral developing unless the economy slowed from its break-neck pace, suggesting he remains in favor of further increases in borrowing costs.
The Fed has raised short-term rates six times since last June. It meets again June 27-28 amid expectations it will keep rates on hold as it waits for the effects of its previous moves to play out more fully on the world's biggest economy.
Meyer's fellow board member, Edward Kelley, agreed the economy appeared headed for a soft landing. But he also said in an interview that a recent rise in U.S. unemployment might well be a watershed for the economy - as long as it was confirmed by more data also hinting at a much-needed slowdown.
"It did come as a big surprise," Kelley said of last month's rise in unemployment to 4.1 percent from a 30-year low of 3.9 percent. Meanwhile, San Francisco Fed President Robert Parry also said the U.S. economy was showing signs of slowing, but he added that it was "too early for anybody to declare victory."
Parry's remarks helped fuel a decline in U.S. stock prices and the dollar as investors fretted over the possibility of further increases in borrowing costs in the months ahead.