| NEW YORK
NEW YORK May 9 Unemployment in the United
States has dropped below its natural equilibrium and could
overheat the economy and prompt faster interest-rate hikes if it
were to drop below 4 percent, a Federal Reserve policymaker said
Boston Fed President Eric Rosengren, in a speech that
reiterated concerns about high U.S. real estate prices
, said the current jobless rate at 4.4 percent has
already fallen below his 4.7-percent estimate of "natural
employment." This theoretically is the lowest level possible
before wage pressures push inflation too high.
He cited a survey in which private economists give a 10
percent chance of unemployment falling below 4 percent. "Such an
overheated economy would likely be accompanied by higher
inflation, which in turn would likely elicit higher interest
rates," he said at a commercial real estate conference.
Rosengren, who has pushed for rate hikes over the last year
but does not vote again on policy until 2019, did not comment
specifically on monetary tightening. The Fed has raised rates
twice since December in part due to the strong labor market.
Turning to the Trump administration's stated plan to reform
U.S. mortgage giants Fannie Mae and Freddie Mac, Rosengren noted
the government-sponsored agencies (GSEs) hold or guarantee some
44 percent of multifamily loans.
"Policymakers looking to reform the GSEs might look at the
GSEs' large and growing footprint in the market and ask whether
this level of government-sponsored exposure is safe, and whether
that level of government support is appropriate," he said at New
York University Stern School of Business.
"A potential and significant shock to this sector of the
commercial real estate market could occur if proposals require
the GSEs to reduce their holdings of multifamily loans."
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)