Fed’s Rosengren: Conditions for Rate Rise Not Yet Met

The U.S labor market needs to strengthen further and inflation needs to show signs of heading back up to 2 percent before the Federal Reserve will raise interest rates, a top Fed official reminded a London audience on Thursday.  The Fed in March set for itself exactly those two conditions for raising rates in what will be its first round of monetary tightening in more than a decade.

By sizing those goals up against the “mixed” labor data since then and a “stubbornly” low rate of inflation, Boston Federal Reserve President Eric Rosengren made it clear that he views the timing of a first rate hike as hardly imminent.  “Incoming data would need to improve to fully satisfy the Committee’s two conditions for starting to raise rates,” Rosengren said. “I do not think that either condition has been met.”

Rosengren, who does not have a vote on the Fed’s policy-setting committee this year, is one of the U.S. central bank’s most dovish officials. He did not say in his remarks at Chatham House in London exactly when he expects a rate hike would be appropriate.  Unemployment, currently at 5.5 percent, is still above the 5 percent rate he views as consistent with full employment.