Moskow: Fed still has room to tighten
Chicago Fed president eyes post-hurricane spending
By Rachel Koning, MarketWatch
Last Update: 3:30 PM ET Sept. 26, 2005
CHICAGO (MarketWatch) - The Federal Reserve has more room to raise interest rates, the president of the bank's Chicago branch said Monday.
Michael Moskow said there may still be excess capacity in the nation's economy but that inflation is running at the upper end of the Fed's comfort zone - a position he's offered in other recent speeches.
"We feel it's necessary to reduce accommodation," Moskow said Monday.
Moskow sits on the Fed's rotational interest-rate panel this year. He was speaking on the sidelines of the National Association for Business Economics conference here. Read more on the group's economic forecast survey.
In raising rates for the 11th time in some 15 months earlier in September, the Fed took its lending target to 3.75% and left the door open to more interest-rate increases. The Fed's statement continued to focus on inflation risks.
Moskow said the impact from the storms in holding down output and pushing up prices may be temporary. He will continue to monitor, in particular, government spending that came in response to Katrina.
A pledge for increased outlays from President Bush and Congress led many private-sector economists to stick with or increase their 2006 economic-growth projections, despite the many uncertainties still posed by Katrina and, to a lesser degree, Hurricane Rita.
During a speech earlier, Moskow said he doesn't support a shift toward specific inflation targets at the U.S. central bank, a practice used in Europe and elsewhere and one favored by former Fed Governor, now Bush economic aide, Ben Bernanke.
Bernanke, who will address the NABE conference Tuesday, is on the short list of replacements for outgoing chairman Alan Greenspan.
AI
