Fed concerned U.S. economy showing no signs of slowing

Fed concerned U.S. economy showing no signs of slowing

WASHINGTON (AFP): The U.S. economy is showing no sign of slowing and is producing upward wage and price pressures, a Federal Reserve Bank president warned here on Tuesday.

"The latest data has raised my level of concern," Alfred Broaddus told reporters after a speech.

Broaddus, head of the Federal Reserve Bank in Richmond, Virginia, is also a voting member of the Fed's policymaking Open Market Committee.

The committee is due to meet May 16 to determine if further interest rate hikes will be needed to avert a spurt in inflation.

The Labor Department reported recently that the core rate of the consumer price index (CPI), which excludes food and energy prices, climbed 0.4 percent in March, twice as much as had been expected.

The report stoked fears that the Fed will have to become more aggressive in its efforts to slow the economy, perhaps by raising rates one half a percentage point next month.

"I said earlier the risks were weighted to the upside with regards to inflation, and I still feel that way," Broaddus said.

"And I would say information, like the CPI number, tends to reinforce that."

In his speech here, he said there was no indication of any slowing in the economy at a time of rising price and wage pressures.

"Some modest rise of price pressure may already be in train," Broaddus told his audience. "We are seeing a few signs of wage increases."

Asked if an expected cooling of the economy will be gradual or sudden -- the so-called "soft" and "hard" landing scenarios -- he replied that "it doesn't look like we are having any landing."

"There are no really clear signs of a slowdown," he said, except for a "few straws in the wind" such as a low number of new homes started in March and a dip in consumer confidence.

If a report on first quarter gross domestic product, to be released Thursday, shows growth of 6.5 percent or higher, it will rekindle questions about "how long the economy can grow at this rate without generating inflation," Broaddus said.

"If you get a number that strong, it will certainly not be comforting," he said.

"If you get a really, really large number there, I think that will reinforce concerns about an upside risk."

The economy expanded at a rate of 7.3 percent in fourth quarter 1999, its fastest clip in 15 years.