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16 Jan 2015
Not particularly confident that inflation will soon rise - Fed's Rosengren
FXStreet (Mumbai) - The US central bank should delay its rate hike decision, Boston Federal Reserve (Fed) President Eric Rosengren reiterated yesterday in an interview with the Wall Street Journal, as he is not sure that inflation will move towards the 2% target soon.
Key Quotes:
"Not particularly confident" that inflation was moving back toward the 2% target.
On falling yields on 10-year Treasuries, he stated, "If you look at the 10-year Treasury rate, it was 1.81%" on Wednesday, Rosengren said. "If you think about a 2% inflation target, it means a negative after-tax real rate of return for an entire 10-year period. It indicates there might be a difference between the market perceptions of how quickly we’re going to get back to a 2% inflation target and when the Fed seems to think we’re going to get back to a 2% inflation target."
"My expectation is that if we continually undershoot we won't raise rates as quickly as we would have ... if we don’t start seeing wages and prices moving in the direction that we expect, that is the implication of patience."
Key Quotes:
"Not particularly confident" that inflation was moving back toward the 2% target.
On falling yields on 10-year Treasuries, he stated, "If you look at the 10-year Treasury rate, it was 1.81%" on Wednesday, Rosengren said. "If you think about a 2% inflation target, it means a negative after-tax real rate of return for an entire 10-year period. It indicates there might be a difference between the market perceptions of how quickly we’re going to get back to a 2% inflation target and when the Fed seems to think we’re going to get back to a 2% inflation target."
"My expectation is that if we continually undershoot we won't raise rates as quickly as we would have ... if we don’t start seeing wages and prices moving in the direction that we expect, that is the implication of patience."