Inflation absent, the Fed reports Central bank says Asian nTC crisis checking U.S. growth

The econony

January 22, 1998|By BLOOMBERG NEWS

WASHINGTON -- Inflation remained absent from the U.S. economy in recent weeks as Asia's financial crisis restrained growth and unleashed a flood of cheaper imports that helped keep prices in check, the Federal Reserve said yesterday.

"As 1997 came to a close the pace of economic growth continued to be moderate," the Fed said. "Prices were generally flat," even as worker shortages persisted -- pushing labor costs higher, and in some cases causing businesses to cut production and expansion plans.

"Manufacturers and agricultural firms report weaker exports to Asia, and there was some evidence of increased competition from Asian products in U.S. markets," the Fed said.

The Fed's regional outlook -- commonly known as the beige book -- is based on reports from the Fed's 12 district banks. It is published eight times each year. The latest edition was compiled by the Federal Reserve Bank of Kansas City from information gathered on or before Jan. 12.

Yesterday's report will help form the basis for discussion on interest rate policy at the Feb. 3-4 meeting of the Fed's policy panel, the Federal Open Market Committee. It demonstrates that "the Asia shock is being felt" nationwide, and could hurt job growth and industrial production, said Robert Dederick, an economic consultant at Northern Trust Co. in Chicago.

Comments in recent days from Fed officials suggest that the central bank is more concerned about the fallout from the Asia crisis on the United States than it is on inflation -- and policy-makers could reduce borrowing costs to guard against an economic slowdown.

The U.S. economy is coming off one of its best years ever, with low inflation, low unemployment, rising incomes, and vibrant growth. And some people are suggesting that the good times will keeping on rolling.

In 1998, the economy will continue its "remarkable" performance even as growth eases a bit, Federal Reserve Bank of Atlanta President Jack Guynn said Tuesday night in Miami. Asked whether he sees deflation as a risk, Guynn said, "I think the prospect for a general price decline is a pretty remote kind of thing." Guynn said he's more worried about inflation. "Inflation is not gone forever," he said.

Pub Date: 1/22/98

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