Fed's Rosengren: 'I Don't Expect We Need to' Revive QE
Friday, 17 Oct 2014 11:44 AM
By Dan Weil
Boston Federal Reserve Bank President Eric Rosengren doesn't yet see the need for additional Fed easing in the face of global economic weakness and financial market turbulence.
"I don't expect that we need to" launch another round of quantitative easing (QE), he told CNBC. "If the economy got weak enough that it was required, we should do it. I certainly hope and I don't expect that will be the case, but I can't rule anything out."
St. Louis Fed President James Bullard's comments that the Fed should consider postponing the completion of QE sent financial markets aflutter Thursday.
The Fed has reduced its bond buying to $15 billion a month from $85 billion last year and has indicated it will halt the program at its meeting later this month.
Bullard said the central bank should reconsider because inflation expectations are receding.
Both Rosengren and Bullard are non-voting members of the policymaking Federal Open Market Committee.
Rosengren said Fed policymakers need time to assess the recent turbulence in financial markets before finalizing a strategy. "But I think it's a little bit too soon to make a judgment" on the cause of the turbulence.
"Unless we have to materially change our forecast, we have made a lot of progress in labor markets. We're at 5.9 percent on the unemployment rate. We were much higher at the outset of the [QE] program," he explained.
"The program was really designed that once we made on the program and labor markets more generally that that program would end. If it looks like we're not going to get that kind of progress now and going forward, then we'd have to reconsider it. I'd be surprised if in the next two weeks we get enough data to change our mind on that."
Some inflation hawks on the Fed have recently pressed for a quick increase in interest rates. But many economists say that would be a bad idea.
"Until we see wages expanding faster than the rate of inflation, and significantly so, we won't see much in the way of inflation pressure," Mike Schenk, vice president of economics for the Credit Union National Association, told Time.
"Why raise rates if you don't have inflation?"
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Poster Comment:
I expect he is correct. ;)