Boston Fed President urges patience

Inflation target not yet reached, according to the President of the Federal Reserve Bank of Boston


Kevin Remington

Boston Fed President Eric Rosengren spoke to a packed Stackhouse Theatre on Monday, Nov. 10. Photo Courtesy of Kevin Remington

Kieran McQuilkin

President of the Federal Reserve Bank of Boston Eric S. Rosengren urged monetary policymakers to “be patient” on raising interest rates on Monday.

Rosengren said he would like to see more evidence of rising inflation before dramatic changes were made. His hesitancy stems from major central banks persistently missing their inflation targets, as they stay below the Fed’s two percent target.

Rosengren spoke in Stackhouse Theater as part of the annual H. Parker Willis Lecture in Political Economy. His speech was titled “Current Issues in Monetary Policy.”

“The bottom line is, we pretty much missed,” Rosengren said. “We thought we would get back to the two percent target but that hasn’t happened.”

The current inflation rate in the US is 1.6 percent. Rosengren said low inflation risks actual deflation, during which consumers and businesses postpone expenditures and labor market recovery becomes a painful process.

Rosengren, who has been president of the Boston Fed since 2007, compared the US economic situation to Japan and Europe, where slow responses to low inflation made it difficult for their markets to recover.

While he urged policymakers not to be complacent in reaching the two percent inflation target, Rosengren said they should not take immediate action.

“Ideally we’d like to get the labor slack out of the economy, so the patient approach supports that well,” Rosengren said.

Rosengren wants to see more accurate inflation rate predictions from central banks. He said Americans want well anchored expectations by Federal Reserve Banks, so small shocks in the economy are less impactful.

Head of the Business Journalism Department Pam Luecke was excited to have one of twelve Federal Reserve Bank presidents speak on campus.

“He is one of the most important economists in the country today,” Luecke said. “So the opportunity to hear his thoughts on inflation and interest rates was a privilege.”

She also said it was noteworthy that, out of all Fed presidents who she has seen speak here, Rosengren was the only one not to speak from a prepared document. He maintained a casual tone while presenting a slide show, and opened up to questions after his speech.