Global uncertainty to weigh on U.S. growth: Fed official

Sun Jul 8, 2012 9:41pm EDT
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BANGKOK (Reuters) - Slow U.S. economic growth will probably continue for quite some time as firms postpone hiring and investment in the face of an uncertain global economy, a top Federal Reserve official said on Monday.

Boston Fed President Eric Rosengren, a dovish policymaker at the U.S. central bank, warned about the weak recovery in the U.S. labor market and the significant number of Americans who remain unemployed more than three years after the recession.

"Apparently, firms have become more tentative in the face of growing global economic uncertainties," Rosengren was to tell the Sasin Bangkok Forum, according to prepared remarks.

But a quick resolution "may remain elusive" for Europe's sovereign debt concerns, the large deficit problems in many countries, and for global banking problems, he said. "This suggests that slow growth is likely to continue for quite some time."

Last week, a handful of central banks including that of China and the euro zone took steps to ease monetary policy, reflecting growing alarm over the health of the world economy.

On Friday, a report showed U.S. jobs growth was tepid for a fourth straight month in June, which could put pressure on the Fed to ease policy even more. Last month, the central bank prolonged a bond maturity-extension program called Operation Twist through the end of the year.

Rosengren does not have a vote on the U.S. central bank's policy-setting committee this year but strongly endorses a strong Fed response to ratchet down the still-high 8.2 percent unemployment rate. He had pushed for the expansion of Twist.

"Significant excess capacity" remains in the U.S. labor market, and job growth has "slowed fairly noticeably" in the last few months, the policymaker said on Monday.

While the Fed did not launch a third controversial round of large-scale bond buying - known as quantitative easing, or QE3 - as some expected last month, its policy-setting Federal Open Market Committee (FOMC) did lower expectations for U.S. growth and inflation, and raised that of unemployment.   Continued...