US economy needs faster growth: Fed vice chair

NEW YORK (AA) – The U.S. economy needs faster potential growth, Stanley Fischer, vice chairman of the Federal Reserve, said Thursday.

Speaking at a conference in honor of economics theorist Michael Woodford at Columbia University, Fischer said faster growth would push up interest rates in the long run.

“…What we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth,” he said.

The Fed has set a 2 percent inflation target to increase its benchmark interest rates.

On Tuesday, inflation in April marked its largest monthly increase in three years, rising 0.4 percent from the previous month, and is now at 1.1 percent year-on-year.

And on Wednesday, the Federal Open Market Committee (FOMC) minutes of the April meeting showed that it “likely would be appropriate” for the Fed to raise interest rates in June if macroeconomic data suggest economic growth, labor market conditions strengthen, and inflation moves towards the 2 percent target.

But in his speech at Columbia University, Fischer refrained from making any comments on the Fed’s monetary policies, and avoided any hints about a possible rate hike next month.

Last December the Fed raised interest rates by 0.25 percent — its first rate hike in almost a decade.

After growing 1.8 percent in 2007, the financial crisis saw the U.S. economy contract by 0.3 percent in 2008 and 2.8 percent in 2009. Since 2012, the economy has grown faster than 2 percent, and is expected to expand by 2.7 percent this year and 2.4 percent in 2017, according to World Bank data.