November 7, 2011 / 1:31 PM / 6 years ago

Rosengren: Fed needs to act aggressively on economy

BOSTON (Reuters) - The Federal Reserve should continue to act “aggressively” to try to bring down the stubbornly high U.S. jobless rate and boost lagging economic growth, a top Fed official said on Monday.

Eric Rosengren, President of the Boston Federal Reserve Bank, said weak labor conditions would help keep inflation below 2 percent over the next several years.

“Given the very weak labor market conditions and the low expected inflation rate, the Federal Reserve should in my view continue to take action to aggressively try to reduce the stubbornly high U.S. unemployment rate,” Rosengren said.

Rosengren touched on policy issues only briefly in prepared remarks to the New England Board of Higher Education conference on higher education and the workforce.

He said that economic growth had been lethargic despite the Fed’s policy actions, and that at 9 percent in October, the jobless rate remains “unacceptably high.”

Job growth has been too slow to make inroads into the unemployment rate, and the United States also faces economic headwinds lingering from the financial crisis of 2008 and from worries about possible future financial shocks, he said.

“In my view the Federal Reserve should continue to use the tools at its disposal to boost demand in the economy,” Rosengren said.

Also imperative is that fiscal policy, as controlled by federal and state governments, kick in to help the economy, he said.

“It is also important for international policy makers to take actions that provide more stable world markets,” he said.

Weighing into the debate about the causes of high joblessness, Rosengren said current research did not suggest a change in the structural level of unemployment but instead, “a story of weak demand throughout the economy.”

Rosengren not a voting member of the Fed’s policy-setting Federal Open Market Committee in 2011. He is often seen as among the central bank’s most dovish members.

Editing by Chizu Nomiyama

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