WASHINGTON – Atlanta Federal Reserve President Jack Guynn (search) said Thursday the U.S. dollar's slide had been controlled and was not hitting the American economy — adding his voice to Fed officials sanguine about the drop.
He also emphasized that the central bank should be shifting its rate stance in the months ahead, arguing that it was time for both monetary and fiscal policy-makers to look past the need to steady growth toward the longer term.
"The (dollar) adjustment has been very orderly, at least as best I can tell ... I don't have the sense that it has terribly impacted our economy or is likely to be some very disruptive force," he told the Buckhead Business Association in Atlanta.
A 41 percent-plus rise in the euro (search) against the dollar in the last two years has Europeans howling for action at a meeting of the Group of Seven in Florida next week.
But Guynn, echoing the untroubled remarks of Fed Chairman Alan Greenspan (search) on Tuesday about the dollar's impact on the U.S. economy, likely reinforced a conviction that U.S. authorities are in no hurry to stem its fall.
And in a broad hint that the Fed would start to raise interest rates at some stage — though not imminently — Guynn argued that fiscal and monetary policy should begin moving from steps to counteract economic weakness to focus on the longer term.
"The kind of (budget) deficits that we are seeing and are projected are not sustainable ... I think its time for those (fiscal policy-making) folks to begin to shift and think longer term, just as we, I think, with monetary policy have to begin to think longer term," he said.
Fed rates stand at a 45-year low of 1 percent and the central bank's policy committee has said it will be able to stay on hold for a "considerable period" without sparking inflation despite strong growth because of economic slack.
Economists say that policy will have to change at some point and some see a quarter-point rise in the coming months.
The Fed's task is also complicated by a high and rising U.S. budget deficit, seen above 4 percent of gross domestic product this year, which could lift the cost of long-term borrowing and hurt heavily-indebted U.S. consumers.
But Guynn, in remarks Thursday which matched a speech he gave on Jan. 5, stressed that inflation remained tame, meaning that the Fed could afford to watch developments in the economy for a while to come.
"I want to emphasize that I see little threat that inflation is poised to rise significantly," he said.
He explained that higher commodity prices, which have risen worldwide as growth picks up, would not have a speedy impact on U.S. inflation. Nor did he fear that a spurt in the cost of energy would be harmful.
"What's so amazing to me is that our economy has been so resilient in terms of being able to respond," he said of the extreme volatility in the oil markets since the late 1990s.
"Oil and gas will continue to be a factor from time to time (and) is going to hit our economy ... I don't think it's one of those catastrophic kinds of events that is likely to derail the economy," he said.
Kansas City Fed President Thomas Hoenig was scheduled to speak later Thursday morning in Broomfield, Colorado, followed by Dallas Fed chief Robert McTeer in Calhoun, Georgia, and Philadelphia Fed President Anthony Santomero in Cherry Hill, New Jersey, in the evening.