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| The dollar rallied against the other major
currencies, helped by an easing of crude oil prices and upbeat comments from
a Federal Reserve official. (AFP) |
Near-record oil prices will slow U.S. economic
growth but won't be enough to derail a self-sustaining expansion,
U.S. Federal Reserve officials said on Monday.
"There's going to be a little bit of a slowdown effect ... but at the
current levels, anyway, I think it won't derail what looks like a
self-sustaining expansion at this point," Fed Governor Ben Bernanke said
in a television interview.
In a separate television appearance, Dallas Federal Reserve Bank
President Robert McTeer agreed. "I think (the expansion is)
self-sustaining and it's not terribly fragile. I don't think it's in jeopardy."
When Fed officials raised interest rates a quarter-percentage point
just under two weeks ago, they said the economy appeared poised for an
acceleration after a soft patch brought about in good measure by high
energy prices.
Oil prices have gained further since then, although a rally that took
U.S. crude up to a record $49.40 late last week has fizzled. U.S. crude
settled at $46.05 on Monday.
The latest run-up in oil prices has led some economists to scale back
forecasts for U.S. economic growth and warn that an economic soft patch
hit in the second quarter as consumers retrenched could prove prolonged.
After expanding at a 4.5 percent annual rate in the first quarter, the
economy grew at only a 3 percent pace in the April-June period.
Bernanke, however, told the public television program Nightly Business
Report that consumer spending was already accelerating. "Most of the
evidence we have suggests it has picked up fairly considerably ... and
that's going to support growth going forward," he said.
He described current U.S. monetary policy, with overnight borrowing
costs at 1.5 percent and the central bank on a "measured" course of rate
increases, as "very accommodative" and said risks appeared balanced
between the potential for a pickup in inflation and slowing growth.
"I think the risks are balanced ... and that therefore our policy seems
to me to be quite appropriate," he said.
Likewise, McTeer stressed the Fed's accommodative policy stance. "The
Fed has not really tightened monetary policy in any strict sense," he
said, referring to the two half-point rate hikes since June.
While Fed officials are expected to boost borrowing costs at their next
meeting on Sept. 21, many analysts think the central bank will pause in
its rate-rise cycle at some point this year and are watching closely for
signs from the Fed on how high oil prices will impact interest rates.
Both Fed officials said high oil prices complicated the picture for the
central bank, because energy price gains not only slow growth but push up
inflation.
(Agencies)
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Updated: 2004-08-24 14:57