WASHINGTON (Reuters) – U.S. Federal Reserve officials are likely to press on with their bond-buying stimulus program even though some harbor growing concerns the purchases could fuel an asset bubble or inflation if pushed too far.
A full-throated debate among U.S. central bankers over the wisdom of ongoing quantitative easing, or QE, sent U.S. stock prices down sharply when minutes of the meeting were released on Wednesday.
The Federal Reserve is cognizant of the potential costs of its unconventional policies, but the economic benefits from asset purchases are still far greater than the potential costs, Atlanta Fed President Dennis Lockhart told Reuters in an interview from his offices.
What follows is an edited transcript of the interview.
The December meeting minutes seemed to signal a shift in sentiment at the central bank toward a greater focus on the policy’s costs. How concerned are you about the risks from QE? Has the cost/benefit tradeoff changed for you? What’s your sense of how long you’ll need to keep going?
WASHINGTON, Feb 20 (Reuters) – The weakest U.S. economic
recovery in recent memory could be damaging the country’s
long-term growth potential, according to a number of Federal
Policymakers at the central bank expressed such concerns at
their Jan. 29-30 policy meeting, according to minutes of the
meeting released on Wednesday.
Richard Fisher, the Dallas Fed’s colorfully hawkish president, enjoys touting the remittances that the central bank makes yearly to Treasury, earned, circularly enough, mostly on the returns of the Treasury bonds the Fed holds. Here’s Fisher in September 2010:
All the emergency liquidity facilities that the Federal Reserve instituted were closed down and did not cost the taxpayers of this great country a single dime. Indeed, last year, as we finished up this work, the Federal Reserve paid $47.4 billion in profits to the Treasury. Imagine that! A government agency that (a) created programs that actually worked as promised, (b) made money for the taxpayers in the process and (c) undid the programs – all in the space of about 28 months – once they had done their job.
ATLANTA (Reuters) – The Federal Reserve’s latest monetary stimulus program is still appropriate through the end of this year given an anemic labor market despite the U.S. economy’s brightening prospects, a top Fed official told Reuters on Tuesday.
Atlanta Federal Reserve Bank President Dennis Lockhart, who is seen as a bellwether centrist at the central bank, said in an interview the avoidance of the so-called fiscal cliff earlier this year has removed some of the uncertainty that had weighed on the U.S. recovery.
WASHINGTON, Feb 11 (Reuters) – The Federal Reserve’s
aggressive and ongoing easing of monetary policy is warranted
given the still-battered state of the U.S. labor market, Fed
Vice Chairman Janet Yellen said on Monday.
In an address to the politically influential AFL-CIO, the
nation’s largest labor group, Yellen, seen as a potential
successor to Fed Chair Ben Bernanke next year, focused on the
anomalously weak nature of the recent economic expansion.
WASHINGTON (Reuters) – The Federal Reserve is still aggressively stimulating an anemic U.S. economic recovery that has failed to bring rapid progress on employment, Fed Vice Chair Janet Yellen said on Monday.
In a rare address to the AFL-CIO, a politically influential labor union, Yellen, seen as a potential successor to Fed Chair Ben Bernanke next year, focused on the anomalously weak nature of the recent economic expansion.
Is it full steam ahead for the Fed’s QE3 or is the U.S. central bank having second thoughts? Next week’s veritable assembly line of speeches from Fed officials could help answer that question. Vice Chair and possible Bernanke successor Janet Yellen kicks off the week with remarks to an AFL-CIO conference. She is followed by numerous regional Fed presidents, the bulk of them with hawkish tendencies: Esther George, Jeffrey Lacker, Charles Plosser and Dennis Lockhart on Tuesday, St. Louis’ James Bullard on Wednesday and Thursday, and finally, Cleveland Fed President Sandra Pianalto Friday. Oh, and the Fed’s regulatory point person, board governor Daniel Tarullo, testifies before the Senate Banking Committee on Thursday. The topic is a now-perennial one: “Wall Street Reform.”
RBC economist Tom Porcelli is such a curmudgeon these days. Still, given that he was one of the few economists that accurately predicted the possibility of a negative reading on fourth quarter GDP, maybe it’s not a bad idea to listen to what he has to say.
This week, he expressed concern about a rapid decline in U.S. productivity – and that was before data showing U.S. nonfarm productivity fell in the fourth quarter by the most in nearly two years.
WASHINGTON, Feb 7 (Reuters) – An extended period of low
interest rates could create risks to financial stability, and
policymakers should keep an eye on junk bond and leveraged loan
markets for signs of excess risk-taking, a top Federal Reserve
official said on Thursday.
Jeremy Stein, a member of the U.S. central bank’s powerful
board of governors, said the current evidence is inconclusive.