Fed's Rosengren urges patience in cutting stimulus, cites job market
Feb 6 (Reuters) - The Federal Reserve should be "quite patient" in removing stimulus despite falling unemployment because broader measures of the U.S. labor market remain weak, a top U.S. central banker said on Thursday.
Boston Fed President Eric Rosengren, among the most dovish of top officials of the U.S. central bank, said the labor market remains far from conditions that would warrant higher interest rates. He repeated that too much slack in the workforce and very low inflation calls for "highly accommodative" monetary policy.
While the Fed has been slowly trimming its bond-buying stimulus in response to recent economic growth and a drop in joblessness, it does not plan to tighten policy for a while longer, perhaps not until late next year.
Rosengren's remarks, prepared for delivery at the New College of Florida, in Sarasota, could shed light on what more esoteric measures of the labor market policymakers will analyze as the unemployment rate, which stood at 6.7 percent in December, drops toward the 6.5 percent threshold that the Fed has highlighted for raising rates.
"We remain very far from historical average levels of labor utilization," Rosengren said in the prepared remarks. "As a result, I firmly believe that monetary policymakers should remain quite patient in removing accommodation."
Rosengren does not have a vote on policy this year under the Fed's rotating system. In December he was the only policymaker to dissent against the Fed's decision to start trimming its bond-buying. After a second cut last month, the Fed's bond purchases are now worth $65 billion per month.
Meanwhile, the Fed will probably have to adjust its promise for keeping rates near zero after a sharp drop in overall joblessness over the last year. It has said rates will likely stay low until well after unemployment falls beyond 6.5 percent, especially if inflation remains weak.
Pointing to the still-high number of part-time and discouraged American workers, Rosengren said broader measures of labor market utilization remain elevated on a historical basis and are higher than the last time the Fed began to raise rates after a recession, in 2004.
"As the economy continues to improve gradually, monetary policymakers need to carefully evaluate labor market conditions," he said.
"My own view is that for now we will need to place greater weight on these broader measures of labor market utilization - measures that are not returning to 'normal' as quickly as is the more narrow ... measure of unemployment."
The drop in U.S. unemployment to 6.7 percent is down from 7.9 percent a year earlier and down from a post-recession high of 10 percent in 2009. The government is due to announce the jobless rate for January on Friday when it releases its monthly labor market report.
(Reporting by Jonathan Spicer; Editing by Leslie Adler)