Newspaper article THE JOURNAL RECORD

Richmond Fed President Foresees Sustainable Growth

Newspaper article THE JOURNAL RECORD

Richmond Fed President Foresees Sustainable Growth

Article excerpt

CHARLOTTE, N.C. -- U.S. economic growth appears to be slowing to a sustainable rate, though central bankers can never lower their guard on inflation, Richmond Federal Reserve President J. Alfred Broaddus said.

Slower growth that began in the third quarter appears to have continued in the fourth quarter, Broaddus said in remarks to the American Furniture Manufacturers Association.

That's coincided with "remarkably benign" inflation reports, he said. Broaddus, a reputed inflation hawk, qualified that the Fed must always remain vigilant against signs of price acceleration. "We have to move CPI toward 2 percent, and ultimately below 2 percent," Broaddus said. "I don't get a lot of comfort from comments that you hear now and then that inflation is dead." Broaddus' remarks failed to offset concern in world financial markets about the course of U.S. interest rates and inflation. The benchmark 30-year Treasury was down 1 4/32 at 98 30/32, and its yield up 9 basis points at 6.58 percent in recent trading. The Federal Open Market Committee meets next on Dec. 17 to consider U.S. rates, which have been unchanged since Jan. 31, when the Fed cut the overnight bank lending rate a quarter point to 5.25 percent. Broaddus, who won't vote at the next FOMC meeting, becomes a voting member of the Fed's policy-making group on Jan. 1, 1997. U.S. growth slowed to a preliminary 2.0 percent in the third quarter, while inflation remained subdued at 0.3 percent in October. A separate producer prices report earlier Wednesday showed the core index -- excluding food and energy -- rose a smaller-than- expected 0.1 percent in November. While that may appear to build the case for unchanged rates on Dec. …

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