By Jonathan Spicer
Jan 31 The recent drop in emerging markets and
U.S. stocks has not hurt the growing momentum of the U.S.
economy or its labor market, a top Federal Reserve official said
on Friday, adding the Fed should not focus too much on
San Francisco Fed President John Williams, speaking on Fox
Business television, said the U.S. central bank is nonetheless
carefully monitoring emerging-market turmoil and discussed it at
a policy meeting this week.
"The movements in the stock market, the movements in
emerging markets, clearly have feedback effects on the U.S.
economy and we take those into consideration in thinking about
the appropriate stance of policy," said Williams, a centrist at
the Fed who does not have a vote on policy this year.
"So far I don't see anything that's happened in the last
month around markets as fundamentally shifting an improving
outlook for the U.S. economy and improving labor markets."
Financial markets in India, Turkey, Argentina and elsewhere
have boomed as the Fed's efforts to bolster economic growth at
home - including bond-buying and ultra-low interest rates -
encouraged investors to seek higher returns in emerging
As the Fed began to talk of unwinding its policy last year,
the so-called "hot money" began to flow back out, a trend that
ramped up again last week, undercutting U.S. stocks too,
on signs that China's economy is slowing.
The Fed's decision on Wednesday to trim its monthly
asset-purchase program by another $10 billion, bringing the
total purchases to $65 billion per month, brought on another
decline in currencies and stocks in emerging markets.
"We shouldn't focus too much on the short-term developments
in markets. That said, we're watching them carefully," Williams
said, adding he hopes that clear communication about the Fed's
policy plans helps to ease uncertainty in global financial
But he said: "The hot money flows, which I do recognize as
an important development, are the result of a number of factors.
I wouldn't say it's just because of Fed policy."