Jan 17, 2013|
Federal Reserve Bank of Boston President Eric Rosengren with his 2013 Outlook
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
-- earlier this morning we had a chance to talk to Eric rose Ingram he's the president of the Boston fed and did you have that interview cued up all right let's latest and will be -- We're joined now by president of the Boston federal reserve bank and that's mr. Eric -- -- and Eric welcome back to the show. -- Erica I read your projections for unemployment. You seemed to be of the -- impression that unemployment it's gonna decline this year how low will go by the end 2013. Well fortunately it's only gonna be a gradual decline that we currently have seven point 8% unemployment. I would expect the unemployment rate to drift down -- this seven -- quarter to seven and a half percent. That conditional on not having a shot from abroad. We're shock from the discussion that's going on in Washington about what the debt ceiling. It is day seven and have -- -- six and so that your talking about modest declines in the rate of unemployment that -- or at seven -- right now aren't. Exactly so it's only modest declines and what that reflects is that the first half the year and expecting GDP growth to really the only potential. That -- you know progress on getting unemployment rate down in the second half of the year assuming we don't have any. Shocked that we start having stronger -- more like a 3% growth rate in the second. That's a pretty aggressive growth rate what makes you think we'll have 3% GDP in the second half of 2013. All is predicated on some of headwinds that we're having a fading a bit. That includes. Some of the fiscal all these discussions getting result that include. State and local spending started to pick up which received some evidence. And -- intercepted sectors are doing quite well so if you look at residential investment the housing sector. That has been growing quite strongly over the last year. Similarly consumer durables which includes things or houses like appliances. And white goods as well as autos sales. I've been quite strong so. Given that monetary policy is accommodative and interest rates are quite low we're starting to see housing prices rise both in this area and other areas of the country. That's an environment where would expect both those interest sensitive sectors. Do provide some I didn't do the overall GDP spending. One thing that concerns me is the issue of uncertainty you know you alluded in the past to the fact that. -- -- the economy was slow in the last quarter of twelve. Because people didn't know what the tax rates are going to be we still don't know what our tax rates are going to be next year the year beyond that. How much does uncertainty come into play and holding back the American economy. I think uncertainty it was a major reason for why we didn't get stronger growth in the second half of last year. And there's no doubt that business fixed investment that decision to buy equipment or investing in commercial property. Slowed down as people were uncertain about how physical live discussion was gonna go. And to the extent that there is an extended kicking the can down the road purposeful policy yup that's not a good thing for the economy we actually want to get the economy. To the point where we're not as worried about what fiscal policy movies so I'm modestly hopeful that as we get through the first quarters of that discussion. Hopefully will be resolved and they don't just. Deferred decisions but actually make some decisions. -- Europe concern you seem to be opposed to cuts in in government spending right now. And I've spent the last couple weeks talking to economists about modern monetary theory which. Really states that the deficit is not as big problem is is as people would make it out to be. How do you feel about deficit spending going forward in a soft economy building water infrastructure spending more money. When we RD have a sixteen trillion dollar deficit. They're just like when you buy a house that you would take out a very large mortgage it's an investment it's not just for consumption. And you think about what kind of return you're getting on that investment. Well it should be no different for the government that if that investment. Hi present value that we should actually make that investment. Particularly at a time where interest rates or government to issue bonds are very low. So if there are high return projects that the public sector can do that might be a transportation. That might be an infrastructure being. When you go around in many parts of the country. I think you'd find that there is infrastructure that you could imagine would generate. Not only job improving the infrastructure. It would make the private sector much more efficient as people get to work more easily if it was -- a more efficient transportation system for example. Can you give us an example a project that he you know could be shovel ready within the next 24 months work. It would create jobs and make the private sector more productive. I was giving a talk got a New York City and driving and don't have relatives like it hadn't been repaired and 3540 years. And we crawled into new York and it was a little bit yeah. So a lot of people are spending a very long time waiting in traffic because we're not fixing the roads appropriately that the kind of example that I would give. Where both we could improve the infrastructure. And ideally it would have caught the collateral benefit to the private sector as well. You know the -- like the idea thank you very much for your time Erica I know your busy man today. Thank you. That's Eric -- -- he's the president of the Boston Federal Reserve Bank up next we're going to be talking to Dan Werner from Morningstar we have three stock picks I'll give you a little hint. They're all in the financial sector that's next on the financial exchange.