A top Federal Reserve official warned Thursday that Europe’s refugee crisis could pose a risk to the economy, listing it among the factors that are giving central bank officials pause about withdrawing monetary stimulus.
Jerome Powell, a member of the Fed’s Board of Governors, added “ongoing pressures from refugee flows into Europe” to the list of global risks to the economy that Fed members are concerned about, alongside other items that other Fed members have raised as concerns in recent weeks. Those risks include slowing growth and high debt in China, the upcoming “Brexit” vote in the United Kingdom, and political and economic stability in Russia, Venezuela and Brazil.
Powell, a permanent voting member of its monetary policy committee, made the comments at a speech in Washington laying out his view of the economy and monetary policy ahead of a mid-June Fed meeting.
Despite the global risks, Powell said, the economy remains “on track” to meet the Fed’s goals of full employment and stable inflation, meaning that crisis-era low interest rates may have to rise.
The Fed will likely have to raise rates “fairly soon,” he said, just the latest in a series of indications from Fed officials that they may seriously consider raising their interest rate target rate at their June meeting.
He added that, for confirmation that growth is still picking up, he would be looking in particular for signs that second-quarter growth will be significantly faster than in the first quarter, when gross domestic product grew at just a 0.5 percent annual rate.
But Powell also suggested that he doesn’t think it’s necessary to hold off of raising rates, or to raise rates quickly in successive meetings. “The risks of waiting are frankly not so great,” he told the audience at the Peterson Institute, a think tank. “This doesn’t feel like an economy that’s bubling over.”
The Fed raised its short-term interest rate target in December from zero for the first time since the financial crisis. It now stands at 0.25 percent to 0.5 percent.
The short-term rates targeted by the Fed influence the cost of credit throughout the economy, including on business loans and consumer products such as mortgages and credit cards.
