The likelihood of stronger economic growth in the second half of this year should force the Federal Reserve Board to focus on curbing inflation rather than stimulating economic growth, the president of the Federal Reserve Bank of San Francisco said Tuesday.
"As the economy begins to accelerate later this year, the balance (in Fed policy) will need to shift toward more emphasis on the risk of re-emerging inflation," Robert T. Parry told a luncheon of local community leaders at the downtown Hilton. It was his first Los Angeles speech since becoming president of the San Francisco Fed last February.
He said inflation will pick up in part because the lower value of the dollar will result in higher prices for imported goods. The dollar has been declining relative to major foreign currencies since last September, when the United States, Britain, France, West Germany and Japan agreed to drive down its value.
Sees 4% Growth in 2nd Half
Parry's remarks came amid speculation that the Fed may have to cut the discount rate that it charges to member banks or take other actions to stimulate a U.S. economy that some experts say has been showing increasing signs of sluggishness.