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5/9/2017, 7:30 PM (Source: TeleTrader)
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Fed's Rosengren: Jobless rate is below target

Inflation in the United States is "fluctuating around" the 2% target and the economy is relatively strong compared to the rest of the world, as growth is "stable and solid, if unspectacular," said Eric Rosengren, president of the Federal Reserve Bank of Boston. The benchmark rate of interest is "still quite low by historical standards" and the central bank's bloated balance sheet has been keeping longer-term down, he stressed in a speech delivered on Tuesday in New York at the Risk Management for Commercial Real Estate Financial Markets Conference.

The macroeconomic situation has been underpinning the real estate market as overseas investors have been tapping on the opportunities, Rosengren noted and pointed to the drop in headline joblessness as one of the contributing factors. The central banker said the 4.4% rate is 0.3 percentage points below his estimate of full employment. In his view, the trend in real estate has also been helped by urbanization.

The risks for reversal in prices in the commercial sector lie in the potential changes to government-sponsored enterprises (GSEs) as 44% of multifamily housing loans are tied to them, Rosengren stated. He said concerns could also come from an economic downturn or a jump in inflation and interest rates. "While I do not expect that a downturn in commercial real estate prices would by itself cause a significant problem for the economy, in some past recessions such an occurrence has propagated an initial adverse shock," he added. The Boston Fed chief isn't a voter this year in the meetings of the national monetary policy panel.

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