Weak dollar is good, official says

A depreciating dollar combined with low interest rates and tax cuts "will provide some stimulus to the economy," said Robert McTeer, president of the Federal Reserve Bank of Dallas.

"There is every reason to expect that the expansion that we have now will get stronger," McTeer said in remarks to the Rotary Club of Honolulu. "Hopefully it will be strong enough to start cutting into the unemployment rate."

US manufacturers have complained that currency policies, especially those of China, have reduced their competitiveness and contributed to seven consecutive months of job losses.

"The depreciation of the dollar in foreign exchange markets will provide stimulus to the economy," McTeer said. "A strong dollar has helped the standard of living of consumers."

"A weak dollar has helped your producers and exporters. It's been a strong for a long time and so probably a little relief is not a bad thing," he said.

McTeer is a non-voting member of the Federal Open Market Committee, which last week kept the overnight bank lending rate at a 45-year low of 1 percent.

The Fed is unique among central banks in large economies in that it has a congressional mandate to provide enough growth to create "maximum employment" as well as stable prices.

In its monetary policy statement on Sept. 16, Fed officials noted that the labor had been weakening.

He said he was "optimistic" about the US economic expansion. That's partly because business fixed investment spending, which grew at an 8 percent annual rate in the second quarter, was likely to continue to expand as demand begins to exhaust idle capacity, McTeer said.

"Business investment has got to pick up because production is growing, output is growing, income is growing, and they are going to reach a limit on how much investment they can do merely to cut costs," he said.

The Dallas Fed president, who did not speak from a prepared text, said the US budget deficit is "a bad idea whose time has come" and suggested it was helping feed the expansion and lift the stock market.

McTeer said he expected to see stronger hiring "in the next month or two" and that in times of a weak job market, worker re-training programs are the "humane and right thing to do."

The US should "give the US business community the right incentives" to create jobs rather than "protect old jobs," McTeer said.

"The overall jobs picture is not quite as bad as it seems because while the establishment survey of employment has continued to decline, the household survey from which the unemployment rate is derived has been essentially flat," McTeer said.