Dollar Not Hurting US Economy: Fed

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Washington, Jan 16: : Atlanta Federal Reserve president Jack Guynn said on Thursday the US Dollar’s slide had been orderly and has not hurt the American economy — adding his voice to Fed officials sanguine about the drop.

He also reiterated his January 5 view that the central bank should be shifting its rate stance in the months ahead, arguing that it was time for both monetary and fiscal policy-makers to look past the need to stimulate growth and more toward the longer term.

“The (dollar) adjustment has been very orderly, at least as best I can tell ... I don’t have the sense that it has terribly impacted our economy or is likely to be some very disruptive force,” he told the Buckhead Business Association in Atlanta.

A 41 per cent-plus rise in the euro against the dollar in the last two years has Europeans howling for action at a meeting of the Group of Seven in Florida next week.

But Mr Guynn, echoing the remarks of Fed Chairman Alan Greenspan on Tuesday about the dollar’s impact on the US economy, likely reinforced a conviction that US authorities are in no hurry to stem its fall.

Kansas City Fed President Thomas Hoenig, speaking in Broomfield, Colorado, steered clear of the dollar but voiced optimism for 2004 economic growth and said inflation would be kept in check by ample slack in the labor market.

“I am very optimistic about the US economy in general.... Our (2004) GDP (gross domestic product) will be around 4-1/2 per cent and that is along the consensus view of most economists,” he told the CTEK Technology Forecast Conference.

Mr Hoenig said December payrolls, with a gain of just 1,000 new jobs versus expectations of 130,000, was disappointing. But he cautioned that it was only one month’s numbers.

On the other hand, with unemployment at 5.7 per cent, he said it would take an average of 200,000 to 300,000 new jobs a month over the year to take up the slack in the labor market, keeping inflation below 2 per cent.

In a broad hint that the Fed would start to raise interest rates at some stage — though not imminently — Mr Guynn said fiscal and monetary policy should begin moving from steps to counteract economic weakness to a focus on the longer term.