The central bank will likely be in a position to raise interest rates at least three times, or maybe more, this year as the US economy finds firmer footing, said Eric Rosengren, president of the Federal Reserve Bank of Boston.
The labor market is close to full employment and the jobless rate is likely to fall even further. Workers are more willing to quit their jobs to jump to another; inflation has picked up; and the economy could grow faster than two percent in the next year or two, Rosengren is expected to tell a New York audience Wednesday.
“The economy has continued to grow,” Rosengren said in prepared remarks. That would justify, “a continued, gradual removal of monetary policy accommodation at least as quickly as suggested…and possibly even a bit more rapidly than that forecast.”
Rosengren spoke at the New York Association for Business Economics on Wednesday. His sentiments echoed Fed Chair Janet Yellen’s statements on Tuesday and Wednesday during her semi-annual report on monetary policy to Congress.
Yellen said that economic growth was moderate and that “waiting too long to remove accommodation would be unwise.”
Many analysts viewed Yellen’s statements as opening the door for the Fed possibly raising rates during its March meeting.
This past December, the Federal Open Market Committee, the Fed’s rate-setting group, raised a key interest rate for only the second time since the 2008 financial crisis. Policymakers, including Rosengren, who was serving a one-year term on the committee, said at the time that they anticipated three rate increases in 2017.
Rosengren said on Wednesday that some sectors of the economy remain weak, including exports, which have been hurt by the stronger dollar and the sluggish economic performance of America’s trading partners.
Still, US economic growth is most reliant on American consumers, and their financial situation has improved as unemployment has fallen and incomes and wealth have grown, Rosengren said.
Consumer spending will likely remain robust and “offset areas of the economy that remain relatively weak,” he said.