November 15, 2017 / 9:10 PM / 10 months ago

Strong U.S. economy calls for December rate hike: Fed's Rosengren

BOSTON (Reuters) - Falling unemployment and sustained growth mean the U.S. economy has accelerated beyond a sustainable level so the Federal Reserve should continue to raise interest rates, including next month, a veteran Fed policymaker said on Wednesday.

File Photo: The Federal Reserve Bank of Boston's President and CEO Eric S. Rosengren speaks in New York, April 17, 2013. REUTERS/Keith Bedford/File Photo

Boston Fed President Eric Rosengren, whose recently hawkish views have reflected the U.S. central bank’s policy tightening over the last year, said “temporary factors” are behind the below-target inflation readings.

The Fed’s preferred price measure has lingered below a 2-percent target for five years and is now at 1.3 percent. Unemployment has fallen to 4.1 percent, down from a crisis-era high of 10 percent, while overall economic growth is running strong at 3 percent.

“It is quite likely that unemployment will fall below 4 percent, which is likely to increase pressures on inflation and asset prices,” said Rosengren, who does not have a vote on the Fed’s policy-setting committee until 2019 under a rotation.

“That suggests the need to continue to gradually remove monetary policy accommodation, which is quite consistent with market expectations of another increase in December,” he added at a Northeastern University economics forum.

The central bank has raised rates twice this year and faces a leadership overhaul next year when Fed Chair Janet Yellen and New York Fed President William Dudley expect to step down. Rosengren is among only a few top policymakers who held their current jobs during the depths of the 2007-2009 financial crisis.

In a speech that largely repeated past comments, he said the economy seems to have moved beyond the point of “maximum sustainable employment” in recent quarters.

Reporting by Tim McLaughlin; Writing by Jonathan SpicerEditing by Chizu Nomiyama

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