Federal Reserve Vice Chairman Stanley Fischer said a recent patch of weak economic data likely won’t throw the US central bank off track for two more interest-rate increases this year.
“There are reasons to think that the first quarter was, again, below what the rest of the year will be,” Fischer said Friday in an interview on CNBC.
Asked if two more rate hikes for the year still feels appropriate, Fischer said, “We’re feeling that way and so far haven’t seen anything to change that.”
Fischer also said that major economies around the world have recently shown signs of renewed strength, contributing to an optimistic tone at the ongoing spring meetings of the International Monetary Fund in Washington.
“A large part of the upbeat tone comes from the fact that China is doing better, Europe is doing better,” he said. “We’re seeing positive changes throughout much of the world.”
Fed officials raised rates in March and stuck to projections that signaled they would make a total of three quarter-point moves this year. Since then investors have pulled back on their expectations for rate hikes after a closely watched measure of inflation unexpectedly fell and estimates of first quarter growth have declined. The Atlanta Fed’s GDPNow gauge currently estimates that from January through March the economy grew at an annualized pace of 0.5 percent.
“There is a very large weather aspect of the division between February and March data,” Fischer said.
He also played down the drop in inflation.
“The two surprises were energy prices and then a very large decline in the price of cell phone usage,” he said. “It actually had an impact on the overall inflation rate. So that is a one-time shock which we believe will not continue to reduce the inflation rate as we move ahead.”
Asked about President Donald Trump’s comments that the dollar may be too strong, Fischer said, “We do not take a particular statement, by even a president, into account in making our decisions on the interest rate.”