Speaking at the New York Stock Exchange on "Financial Markets and the Federal Reserve," Fed Governor Kevin M. Warsh (voter) was hawkish. He noted concern about the inflation outlook and said that inflation "remains uncomfortably elevated" and said that there are "clear upside risks" to the outlook.
He also indicated that his forecast includes a wider range of options than the markets, which expects inflation to gradually ease and the Fed to cut rates by 50 bps next year. In this respect he echoes recent remarks by Fed Vice Chairman Donald Kohn. With regards to the economy, Warsh indicated that he sees the economy moving closer to its long-run potential (the Fed's staff estimate is in the 2.5% to 3.0% range for 2007).
He said that the drop in the housing sector will restrain growth into the coming year. The complete text of Warsh's remarks is available on the Board's website at: http://www.federalreserve.gov/boarddocs/
speeches/2006/20061121/default.htm
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