Fed's Rosengren (non-voter, hawk) says somewhat more tightening than FOMC forecasts suggest might be needed

• Rosengren: Inflation likely to increase a bit more than the current median FOMC forecasts, will reach then exceed target gradually


• Rosengren: Labor markets are tight, may tighten more than FOMC forecasts project, wages have been rising gradually


• Rosengren: Unlikely that the economy would perform poorly in near term; monetary and fiscal policy remain accommodative, but accommodation may generate risks in long term


• Rosengren: By using up so much fiscal capacity now, US risks not having sufficient fiscal capacity in the future when it might be needed, would be troubling if monetary policy could not aggressively offset adverse shocks.


• Rosengren notes forecasts are imperfect and not a promise; contingent on trade developments, international monetary policy, OPEC 


• Rosengren: Short-term risks include international trade, and an overheating economy


• Rosengren believes it would take a significantly broader set of trade actions than those reported to materially reduce US exports, but spillover effects are possible


• Rosengren: Trend falling import prices due to strong dollar appears to be changing more recently


• Rosengren: Long-term risks include reduced capacity of both fiscal and monetary policy to act against downturns


• Rosengren: Fed has been falling short of inflation goal due to the decline in the relative price of imports from 2014-2016, and the decline in telecommunications prices in early 2017


• Rosengren says spreads between corporate bonds and 10-yr Treasuries has fallen to relatively low levels, notes studies have showing investor confidence that generates low credit spreads often precedes subsequent economic reversals


• Rosengren says FOMC outlook is fairly optimistic, but his outlook is firmer


• Rosengren: Fed's long-term interest rate forecast low by historical standards due to demographics slowing labour force growth and productivity

Analysis details (12:27)

• Rosengren has previously hinted he is in the four-hike camp; FOMC median projections (March) pencilled in three hikes in 2018


• Rosengren's own economic forecast calls for an even more pronounced decline in the unemployment rate, given his expectation that cyclical strength in labour force participation will provide only a partial offset to solid gains inpayrolls


• Rosengren is optimistic, but warns the Fed must consider risks to the outlook

13 Apr 2018 - 13:10- Forex- Source: Fed