Central bank should not be in a hurry to tighten interest rates, Fed's Rosengren says

The US central bank should not be in a hurry to tighten its policy settings in inflation was set to rise more slowly than predicted, a top policy-maker said.

“In my own view, if inflation is slower to return to target, monetary policy normalization should be unhurried,” Rosengren said.

Speaking on Tuesday evening at Colby college, Maine, the president of the Federal Reserve bank of Boston, Eric Rosengren, went on to explain that the strengthening US dollar and drop in oil prices made it less likely the monetary authority would be able to meet its 2.0% target for consumer price inflation.

Projections provided by Fed rate-setters in December for four interest rate hikes in 2016 were not a promise, but rather a forecast based on underlying macroeconomic estimates, the central banker said..

“As incoming data alter those expectations, those projections can, and should, change,” he added.

“While it is likely that much of the fourth quarter slowdown is due to temporary factors...if a more pronounced global weakness were to materialize and be transmitted to the U.S., I personally believe there would be little need to raise rates until the economy was growing closer to its potential rate.”