U.S. Treasury Secretary John Snow said on Thursday the U.S. economy was facing “moderate” price pressures but that there was no need to worry about an inflationary spike.
“The latest report indicates that there’s some moderate upward pressure on prices,” Snow said in an interview with the cable news network MSNBC.
“But overall we still have the lowest inflation rate in 45 years and there is a lot of running room in this economy for continued growth, for creation of more jobs, without strong upward inflationary pressures,” he added.
The U.S. consumer price index shot up 0.5 percent in March, the Labor Department said on Wednesday. Core prices, which strip out food and energy costs, increased 0.4 percent — the biggest gain since November 2001.
“I’m not particularly concerned about it at this point,” Snow earlier told the cable channel CNBC.
Snow said there was enough economic slack to keep price rises at bay, citing excess capacity in factories and industry. He said intense competition meant few companies had the ability to raise prices and keep customers.
Snow deferred to Federal Reserve Chairman Alan Greenspan when questioned, in both interviews, on the direction of interest rates.
The CPI report, coupled with a pick up in job creation and healthy retail sales, have led some in financial markets to expect the central bank to bump up overnight interest rates from their current 1958 low of 1 percent sometime this summer.
Snow told MSNBC he was not surprised Treasury bond yields had risen in response to recent signs of strong economic growth. “Obviously with the good numbers we got on retail sales there was a reaction in the bond market, that’s to be expected,” he said.
Asked in another interview, on CNN, about the movement of U.S. jobs to cheap-wage countries — a hot election-year issue — Snow said it was important that the United States not give way to protectionism.
“Our focus is on what creates good jobs for Americans and we have to recognize that we are 5 percent — only 5 percent — of the world’s population which means that 95 percent of our customers and potential customers lie outside the United States. The last thing we should want to do is pursue a policy of economic isolationism,” Snow said.
He said the U.S. budget deficit, forecast to rise to some half-trillion dollars this year, was “too large” and “unwelcome”. However, he did not agree with forecasts of dire consequences for the global economy from these gaps.
“No, I don’t agree ... because we’re going to bring the deficit down,” Snow said, repeating a Bush administration commitment to halve the budget gap in five years.