By Isaac Cohen*
The US central bank raised interest rates last December and March, indicating a turn towards a tighter monetary policy and recognition of the economy’s strength. Additionally, the release of the March meeting’s minutes revealed that members of the Open Market Committee discussed how to reduce the central bank’s bond portfolio. During the economic recovery, what was known as “quantitative easing” led the central bank to purchase Treasury and mortgage backed securities for almost $3.5 trillion.
The last employment figures in March supported monetary policy tightening, despite disappointing job creation of only 98,000 new jobs, much less than 216,000 in January and 219,000 in February. Even so, the unemployment rate fell to 4.5 percent, from 4.7 percent in February, the lowest level since May 2007. Hourly earnings increased 2.7 percent from a year earlier, which means employers need to offer better salaries to hire qualified workers.
Finally, last week, the Commerce Department said the personal consumption index in February, for the first time in five years, reached 2.1 percent, above the 2 percent target set by the central bank. This means the Federal Reserve has accomplished its dual mandate, the highest employment level with the lowest inflation rate. Henceforward, to reach higher rates of economic growth beyond the rate of around 2 percent of the last years, the impulse will have to come from fiscal policy.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media. Former Director, UNECLAC Washington.A