* Central banker expects 2-2.5 pct U.S. growth this year
* $85 bln in monthly bond buys appropriate for now -Dudley
* Policymaker to tour Staten Island areas hit by Sandy
By Jonathan Spicer
NEW YORK, April 16 An influential Federal
Reserve official said on Tuesday the weak March jobs report made
him more cautious on how far the economy has come, and
underscores the need for the U.S. central bank to keep buying
In a breakfast address, New York Fed President William
Dudley said he expects "sluggish" economic growth of 2 to 2.5
percent this year and only a modest decline in unemployment. The
labor market, he said, has not yet shown the substantial
improvement the Fed seeks.
A paltry 88,000 new jobs were created last month, well below
expectations, while the jobless rate fell by a tenth to 7.6
percent because droves of Americans gave up the search for work.
"While I don't want to read too much into a single month's
data, this underscores the need to wait and see how the economy
develops before declaring victory prematurely," said Dudley, a
permanent voting member of the Fed's monetary policy committee
and a close ally of Fed Chairman Ben Bernanke.
"I'd note that we saw similar slowdowns in job creation in
2011 and 2012 after pickups in the job creation rate and this,
along with the large amount of fiscal restraint hitting the
economy now, makes me more cautious," he told the Staten Island
Chamber of Commerce.
Frustrated with the slow and erratic economic recovery from
the 2007-2009 recession, the Fed has kept interest rates at rock
bottom and is buying $85 billion in Treasury and mortgage bonds
per month to spur investment, hiring, and overall growth.
Dudley, a strong backer of the quantitative easing program,
said he is closely watching the effects tighter fiscal policies
will have on the economy. He said he expects "at some point" to
see sufficient evidence of improved economic momentum to favor
gradually dialing back the pace of asset purchases.
"Of course, any subsequent bad news could lead me to favor
dialing them back up again," he added.
Dudley has repeatedly complained that the U.S. government is
not helping nurture the U.S. economy, which grew at a tepid 1.7
percent last year in part due to a lackluster fourth quarter,
when Superstorm Sandy hit hard Staten Island and this coastal
Growth is expected to have picked up in the first quarter of
this year, but a large package of government spending cuts as
well as higher taxes could yet dampen activity.
Dudley said he expects clarity on the effects of the fiscal
tightening, "for better or worse," in coming months.
Unlike other major central banks globally, the Fed has tied
its third round of quantitative easing (QE3) to a substantial
improvement in labor market conditions, and it expects to keep
rates near zero until unemployment drops to 6.5 percent or so.
While joblessness has fallen from 10 percent in 2009, "much
of the decrease is due to a fall in the number of people
actively looking for a job," said Dudley, who later on Tuesday
plans to tour some areas of the New York City borough where
homes and businesses were destroyed in Sandy's storm surge.
The Fed policymaker pointed, however, to consumer spending,
the housing market, and investment in equipment and software as
bright spots in the United States.