Reply #106: FLIP-FLOP ALERT: Kohn: Now is not the time to pause [View All]

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http://www.marketwatch.com/news/story.asp?guid=%7B1A42B9A8%2D8B44%2D4D0F%2DA2B9%2D8CD6BE503000%7D&siteid=mktw

WASHINGTON (MarketWatch) -- There is no benefit for the economy from the Federal Reserve pausing in its gradual path toward higher interest rates, according to Fed Gov. Donald Kohn.

"Obviously, we are considerably closer to where policy needs to be that we were 16 months ago, but we are not yet at a point where we can stop and watch the economy evolve for a while," Kohn said Wednesday in a speech prepared for delivery at Carnegie-Mellon University.

Continued, measured rate hikes would guard against fast growth and could keep inflation contained, he added. Read full text of Kohn's remarks.

Treasury prices did not move much on Kohn's remarks or from speeches by other Fed officials. The market has not been anticipating a pause by the central bank since the last FOMC meeting on Sept. 20. See Bond Report.

The stock market also shrugged off the comments. See Market Snapshot.

Kohn said his best guess was that economic activity will slow modestly over the next year, leaving the economy growing around at its trend rate, which economists generally put at about 3.5%.

The risks to the outlook "may be skewed a little toward the upside on inflation," he added. "Overall, the outlook remains favorable for continued solid growth in real activity and low underlying inflation."

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