Federal Reserve Board Vice ChairmanManuel Johnson said he does not see increasing pressure on
interest rates but said the Fed would watch out for
developments that could push them higher.
    Johnson said that it was too early to tell if recent
indicators on the economy contradicted Fed expectations of
continued modest growth.
    "We are not anticipating any problems or see increased
interest rate pressures," Johnson told reporters after a speech
to the Eastern Economic Association.
    However, Johnson said the Fed would be alert to an
excessive depreciation in the dollar, a rise in bond yields,
increases in commodity prices, or other variables.
    "We would have to pay attention," he said.
    Recent indicators on retail sales and factory orders that
indicated weakness in the economy could be presenting an
inaccurate picture, Johnson said.
    The more recent data are too caught up in statistical
adjustment problems having to do with the end of the year and
the beginning of the year, he said.
    Asked if the Fed was continuing to be generous with
reserves, Johnson said, "We have accommodated reasonable,
non-inflationary real growth."
    He said the Fed was able to do that because of the decline
in inflation expectations and monetary velocity.
    "I don't think we can be accused of being too generous," he
added.
 Reuter
