Fed’s Musalem expects continued financial development, however sees dangers in latest information

By Howard Schneider

WASHINGTON (Reuters) – St. Louis Federal Reserve President Alberto Musalem stated on Monday he expects the U.S. economic system to proceed to broaden this yr, however latest weaker-than-expected consumption and housing information and reviews from enterprise contacts have raised considerations about doable dangers to development.

“The outlook for continued strong financial development seems to be good, the labor market is wholesome, and monetary situations are supportive. However latest information have been weaker than anticipated,

particularly shopper spending and housing market information, posing some draw back danger to development,” Musalem stated in feedback ready for supply to a Nationwide Affiliation for Enterprise Economics convention.

“Latest anecdotal reviews from enterprise contacts are extra combined, and a few measures point out that enterprise exercise has slowed, suggesting elevated warning at the least amongst some companies,” he stated.

“Whereas I proceed to count on the economic system to develop at a great tempo in coming quarters, I’d turn out to be involved if we start to see extra proof of a shopper pullback or a dampening of enterprise confidence and funding plans,” Musalem stated.

For now, nevertheless, he stated he views present financial coverage as “modestly restrictive,” an applicable setting given inflation stays above the Fed’s 2% goal.

“Extra financial coverage work is required to realize value stability,” stated Musalem, endorsing the U.S. central financial institution’s present “affected person” strategy to additional adjustments to its benchmark coverage price.

Latest information confirmed private consumption spending declined unexpectedly in January. Coupled with inflation that has been solely slowly bettering, some Fed officers have begun elevating the likelihood that their two goals of controlling inflation and sustaining most employment might come into battle.

The Fed is anticipated to carry its coverage price regular within the present 4.25%-4.50% vary at its March 18-19 assembly, with officers hoping for extra affirmation that value pressures are easing, and awaiting extra element on the doable impression of Trump administration commerce and different insurance policies.

(Reporting by Howard Schneider; Enhancing by Paul Simao)