Fed vice-chair Fischer sounds optimistic note on US economy

In remarks prepared for a speech, US Federal Reserve vice chairman Stanley Fischer said "we are close to our targets", adding that employment had been "remarkably resilient".

“Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes."

Speaking at the conference on the world economy at The Aspen Institute in Colorado, on 21 August, Fischer also said that inflation, as measured by the core price deflator for personal consumption expenditures, was within hailing distance of rate-setters' 2.0% target and the consumer price index was above 2.0%.

Nonetheless, output growth had been "much less impressive", he said, although that pace likely understated the underlying momentum in GDP, in part as a result of the "sizeable" inventory correction which began early last year -despite which GDP growth had been "mediocre".

Roughly half his speech was devoted to the "exceptionally" slow rate of growth in labour productivity, which he pointed out was a global phenomenon. After three quarters of declines business productivity Stateside had registered its worst performance since 1979.

He described the gap between the rates of productivity growth between 2006 to 2015, at 1.25%, and between 1949 and 2005, of 2.5%, as a "massive" shortfall.

In his opinion, the key to boosting the long-run potential rate of growth of the US economy likely lay effective fiscal and regulatory policies.

Fischer, who's views on monetary policy were widely considered to be similar to those of Fed chair Janet Yellen herself, was speaking ahead of the Federal Reserve's annual economic symposium, at Jackson Hole, Wyoming on 25 to 27 August.

Some economists believed Yellen would use her speech at the symposium on 26 August to flag her thoughts on policy.