Labor Market More Worrisome, Fed Officials Indicate
Continued strains in the labor market are weighing on Federal Reserve officials more than recent turmoil in Europe, their public comments Thursday suggested.</br></br>Federal Reserve Bank of Atlanta President Dennis Lockhart indicated that the central bank may raise interest rates even if joblessness remains high. "[G]ood policy, even in circumstances of unacceptable levels of unemployment, may incorporate higher interest rates."</br></br>Mr. Lockhart, whose views tend to mirror the consensus on the Fed's policy committee, said "the time is approaching when it will be appropriate" for the Fed to consider raising rates, but that time hasn't arrived yet. "However, as the economy continues to improve and financial markets find firmer ground, extraordinarily low policy rates will not be needed...will become inconsistent with maintaining price stability."</br></br>He acknowledged that the European concerns "have added to uncertainty" in financial markets. But neither he nor other Fed officials who spoke Thursday suggested Europe is a predominant concern. Federal Reserve Bank of Kansas City President Thomas Hoenig said the situation in Europe "reminds us to be wary," and noted the shift from riskier assets "will have a modest negative net effect on U.S. economic growth in the near term."</br></br>But the officials' comments suggested that the path for interest rates hadn't been altered much by recent developments overseas.