An example of this was the fact that while confidence plummeted in January, "you got strong consumption and consumption was outrunning income," he said, referring to the 0.7% rise in personal spending in January.
"I don't want to tell you that confidence data mean nothing. You don't want to view this connection as being so tight as being absolutely compelling," he said of the relationship between confidence and spending. As for the current inflation environment, Poole described it as "well under control" and said this gives the Fed "a lot more room to pursue stabilizing policy."
"That means we can pursue a policy that has some prospect of cushioning the short-run developments and certainly of preventing these short-run developments from becoming cumulative," Poole said. He said he viewed recent inflation data, such as the bigger-than-expected 0.6% jump in January consumer prices, as a "one-off" event due to special circumstances and said the "incoming inflation numbers are very unlikely to change attitudes towards this longer-run picture." He added that inflation expectations show "very little movement."
The Federal Reserve cut interest rates by a full percentage point in January and the financial markets widely expect the Fed to cut rates by half a percentage point at its March 20 policy meeting and to continue stating that the risks to the economy are on the downside. End Copyright 2001 Bridge Information Systems Inc. All rights reserved.