By Agence France-Presse U.S. inflation rates should remain near current low levels even as stronger economic growth begins to create a "significant" number of new jobs, William Poole, president of the Federal Reserve Bank of St. Louis, said Feb. 20. "I see no reason why we should not see a similarly benign inflation outcome this year," he said. With inflation low and its credibility as an inflation-fighter intact, the Fed can afford to be "patient" before raising rates. Poole, a voting member of the Federal Open Market Committee this year, is considered one of the leaders of the FOMC hawks, a group that generally favors higher interest rates that keep inflation in check. "Maintaining existing core rates of inflation around their current levels makes a lot of sense," he said, in contrast to other members of the committee who have said current levels of inflation are too low. Nonetheless, he gave no timetable for the inevitable rate increase. "It is not possible to predict the timing of adjustments to the federal funds rate target, but we are fortunate that the market understands the issue so well," he said. Additionally, Poole said productivity gains would slow this year to around 3% from 4.2% in 2003. "This analysis leads me to expect higher employment growth in 2004," he said, quoting consensus forecasts of around 150,000 to 170,000 a month. "It's not that productivity growth is too high; the issue is simply that real GDP growth is not strong enough to generate new jobs given that productivity growth," Poole said. "As a matter of arithmetic, unless we see real GDP growth in excess of labor productivity growth on a sustained basis, we won't see much job creation." Copyright Agence France-Presse, 2004
