Moskow: Fed set if economy overheats

July 23, 2004

NEW YORK (Reuters) - The Federal Reserve can probably raise interest rates at a measured pace but if the economy overheats, the central bank will move more aggressively, Chicago Fed President Michael Moskow said Friday.

"The Federal Reserve will be vigilant to make sure that inflationary pressures do not jeopardize our goal of price stability. If the economy begins to overheat, the Fed will move more aggressively toward a neutral policy stance," Moskow said in prepared remarks to an economic breakfast in Chicago.

In a speech that echoed the themes of Fed Chairman Alan Greenspan's testimony to Congress earlier this week, Moskow also said it was difficult to define a "neutral" level of interest rates that neither boosts nor drags on the economy.

He said the Fed's forecasts released this week show inflation should remain low, though the central bank is "carefully monitoring" the persistence of recent price increases.

Moskow, who is not a voting member on the Fed's policy committee this year, played down the recent soft patch in economic data and said economic growth during the first half of the year was "quite solid."

Home Loans Articles, Mortgage Loans Articles, Financial News