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U.S. economy likely rebounds in Q2, Fed vice chairman

Xinhua, July 1, 2015 Adjust font size:

U.S. economy likely expanded at an annual rate of about 2.5 percent in the second quarter, with support from rebounding consumer demand, said Stanley Fischer, vice chairman of the U.S. Federal Reserve.

According to his remarks at the University of Oxford released on the Fed's website on Tuesday, the senior Fed official believed there are grounds for optimism that economic growth will be sufficient to promote further gains in labor market conditions. The reason for the optimism is that consumer spending would be supported by the earlier declines in oil prices.

At the beginning of this year, the U.S. consumers were holding back their spending despite the boost from the low oil prices, which remained a puzzle for economists and government officials. In the first quarter of this year, the consumer spending, which accounts for about 70 percent of the U.S. economy, increased 2.1 percent, much lower than the fourth quarter's 4.4 percent increase.

Fischer believed that consumer spending should be helped by the fall in oil prices, as lower gasoline prices are estimated to save the typical household about 700 U.S. dollars this year.

Although oil prices declines had some negative impact on oil drilling industry, Fischer held that, on net, the U.S. should gain from the fall in oil prices, given that the country is still a sizable importer of oil.

In regard to the inflation, the Fed expected the inflation will likely to reach its 2 percent target within about two years, as the labor market tightens and the transitory effects of declines in energy and import prices wane.

The senior Fed official stressed again that the interest rate hikes will be data dependent and will be gradual. Market investors widely see September or even later as the most likely time for a Fed rate increase. The Fed has kept its benchmark short-term interest rate near zero since December 2008. Endite