Fed official raises concern over US growth

A Federal Reserve policymaker has warned stockmarket volatility and falling commodity prices could deal a setback to US growth.

The FT reports that president of the Boston branch of the Fed Eric Rosengren has suggested US growth forecasts may need to be reduced as a result of the market volatility seen in China and a sharp contraction in Chinese manufacturing.

In a speech in New York, he said: “These developments might suggest a downward revision in the forecast that is large enough to raise concerns about whether further tightening of labour markets is likely.

“Without an expectation of growth above potential and further tightening of labour markets, I would lose my primary rationale for a forecast of rising inflation, diminishing my confidence that inflation will reach the 2 per cent target within a reasonable timeframe.”

In its latest growth forecast update, the Fed confirmed its lowered forecast for growth for 2015 to between 1.8 and 2 per cent, below the previous projection of 2.3 to 2.7 per cent.

Last week, William Dudley, the head of the New York branch of the Fed, played down expectations the bank will raise interest rates next month saying ”the case for tightening monetary policy next month is “less compelling to me than it was a few weeks ago”.