Hurricanes complicate short-term economic forecast — US Fed official

Monday, September 25, 2017

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WASHINGTON, United States (AFP) — The impact of the three hurricanes that hit the US mainland and territories in recent weeks will complicate economic forecasts in the short-term, but the American economy remains likely to see solid growth, a US central banker said Monday.

That means the Federal Reserve can continue to raise the benchmark interest rate gradually, New York Federal Reserve Bank President William Dudley said, echoing the Fed's policy statement last week when it kept interest rates on hold, but kept alive the prospects for third rate increase in December.

In the first public comments since the Fed meeting, he noted that Hurricanes Harvey, Irma and Maria have "imposed immeasurable hardship" on the communities in the storms' path, but the impact on the overall economy is likely to be short-lived.

"Looking beyond the storm effects — which will make interpreting near-term economic data releases more difficult --the US economy remains on a trajectory of slightly above-trend growth," Dudley said.

"Natural disasters tend to depress economic activity initially, but once the recovery and reconstruction efforts get underway in earnest, such disasters actually serve to lift economic activity."

Dudley repeated the comments from Fed Chair Janet Yellen last week saying "the fading of effects from a number of temporary, idiosyncratic factors" mean inflation finally will begin to rise to the Fed's two percent target in the medium term.

The Fed has consistently brushed off below-target inflation by citing one-off price declines, but the central bank last week signalled that despite tepid price pressures a third interest rate hike is still possible in December.

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