Business Channel 2007-05-13&15

Alfred Broaddus is the former president of the Richmond Federal Reserve, he joins us now. Mr. Broaddus, it's always a pleasure to have you with us on Saturday, we appreciate it.

Nice to be here.

So, you know Steve Tang in chief was saying:" Look, looks like they just zero access? "They did change one phrase about economic growth slowing in the first part of the year. What did you hear in this statement that's significant?

Well, you know, as you said it's absolutely no significant change, they already did salute 1 the slower growth in the first quarter. I guess that's not too much of a surprise, you know, one thing that occurred to me as I looked at some of the background information ,one of the things they mentioned in the minutes of the last meeting was the apparent weakening at that time in capital spending, business spending for equipment.

That has actually means monthly they're a little bit stronger, so you know, when I was looking ahead, I thought maybe they would just leave. I wasn't sure they'd even changed that. But I guess they felt that they had to change, they had to recognize the slowing in the first, first quarter. I might just mention something, some of your commenters earlier, earlier were talking about the inflation the situation. You know I always mention that year over year CorePCE number when you interviewed me (Yeah! ) and the last number there which is from March, over last March ,actually it was a pretty good number, 2.1%, which was right above the top of the Fed's supposed, the, I guess I can't use the word "target", you know, desired range. One thing that needs to be brought out here even though it wasn't mentioned in the statement is that there is some concern in some quarters of productivity growth ,Tran productivity growth has been slowing and that would tend to make the longer term inflation outlook maybe a little bit less favorable than what otherwise would be the case. Now I think that might be in the minds of some committee, still very uncertain. But I think that might possibly be a fact of this influencing that can change their concern about inflation.

And refusal to sort of rush that down, I guess, but here's my question to you, Mr. Broaddus, you know, we have two CEOs on the top of the program, Graco Industial and Cash America, a pawn 2 shop, both of them said:" I don't need the Fed to cut rates in order for my business to be all right or in order to avert 3 a recession." But both of them said:" It will be really nice, I'd love to see the Fed cut rates." Do you think that the Fed feels that pressure? Do you think that they will cut this year?

I don't think they feel much pressure now .The business folks are blessed their heart to keep the economy rolling. All of them have bias 4 towards lower, lower interest rate for obvious raise. But I think, and I think the Fed first is I suspect really quite satisfied with the current situation. I do believe they want to see that year over year inflation rate as measured by the CorePCE drop down fairly soon into the 1.5% to 2% range that they desire and I think that's could be a factor. I don't think, at this point they are unduly 5 worried about emerging weakness in the economy. I expect they are projecting some gradual increase now. You know, we do have weakness in housings. Still, if that continues, if that were to get worse. Then, that's the kind of the thing that might at some point down the road trigger a Fed easing ,but that's not something that I think they're looking forword now.

Alright, on hold until further notice, Mr. Broaddus, it's always great to talk to you, thank you.