The U.S. economy had a weak start to 2015 but growth should rebound going forward, Federal Reserve Vice Chairman Stanley Fischer said Thursday.
“There’s definitely a rebound on the way already, and we’ll see at what speed it proceeds,” Mr. Fischer said during an interview on CNBC. “The first quarter was poor. That seems to be a new seasonal pattern. It’s been that way for about four of the last five years.”
The effect on the Fed’s policy decisions, he said, depends on “how quickly we come out. If you look at last year, we had negative growth in the first quarter and then spectacular growth which made up for that. We don’t know what’s going to happen in the second quarter here yet.”
Mr. Fischer said he expects “a recovery” but “whether it will be spectacular or just moderate is hard to say now.”
Most officials at the U.S. central bank expect to begin raising short-term interest rates this year, but the precise timing of the first rate increase remains uncertain.
Richmond Fed President Jeffrey Lacker said Wednesday that he thinks a “strong case” can be made to raise rates at the Fed’s June policy meeting, and suggested the economy’s recent performance may have been weighed down by temporary factors.
But New York Fed President William Dudley said last week that the recent stretch of weak economic data means “it’d be reasonable to think that the timing of the Fed’s first rate hike might be a little further off in time. I can imagine a situation where a June rate hike could still be in play…but obviously it’s a bigger hurdle because we’ve had a lot of weak data. Now you have to see sufficient data on the other side. Now the bar is a little higher.”
Mr. Fischer said on Thursday that the Fed will try to raise rates “at the best possible time. We’d like to see the economy beginning to grow again and grow at a decent rate, and we’d like to see unemployment continue to come down and some signs that inflation is…heading toward the 2% target.”
U.S. wage growth has been stagnant for years, but many economists expect pay raises will accelerate as the labor market continues to tighten. “There are more signs every day, and lots of papers come through my computer explaining that this is the turning point, right now,” Mr. Fischer said. “But they’ve been coming for a while.”
He also commented on overseas growth, saying the eurozone’s outlook has improved in part thanks to the European Central Bank‘s bond-buying program, sometimes called quantitative easing or QE.
“First of all, like us, they have the impact of the lower price of energy and of gasoline,” Mr. Fischer said. “And now they have done what everybody told them to do for a very long time. They’re doing QE and it’s far more successful, at this point, than the general view had been before this started. So yeah, they’ve got some wind in their sails.”