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Melville, NY - The Federal Reserve has not yet decided on whether to embark on a third round of quantitative easing, or QE3, New York Fed president William Dudley said on Monday.
A decision on such large-scale asset purchases would depend on how the economy evolves, and would take into account “costs and benefits”, Dudley added.
Dudley, an influential US Federal Reserve official, painted a mixed picture of the world’s largest economy, tempering recent signs the recovery is gaining speed with warnings that it could just as easily stall out.
He is a close ally of chairpersonn Ben Bernanke, but did not hint at what more, if anything, the Fed should do to encourage the recovery.
But Dudley said US economic activity is not yet strong or sustained enough to put a dent in the economy’s “slack”, which keeps the unemployment rate high at 8.3% despite a recent pickup in jobs.
“The incoming data on the US economy has been a bit more upbeat of late, suggesting that the recovery may be finally establishing a somewhat firmer footing,” Dudley said, citing expanding gross domestic product late last year, payrolls, sales of motor vehicles, and somewhat firmer housing starts.
Policy dove
“While these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods,” Dudley, a policy dove with a permanent vote on the Fed’s policy-setting committee, told a gathering of the Long Island Association.
The US central bank has kept interest rates near zero since late 2008 and bought $2.3 trillion in long-term securities to help revive the economy after the deep 2007-2009 recession.
Some good data so far this year has tempted some to say the recovery is well under way and that the Fed will take no further steps.
Yet Dudley, Bernanke and other policymakers have said more bond purchases remain an option.
Based on data for the first half of March, Dudley warned that higher petrol prices will further sap consumers’ purchasing power.
Other headwinds include impediments to the housing sector, fiscal drags at the federal and state levels, and risks that foreign growth is weaker than expected, he said.
Dudley’s comments come a week after a meeting in Washington in which the Fed’s policy-setting committee made no policy change and gave few clues how it interpreted the recent jobs growth, coupled as it has been with worries over overall growth and oil price-driven inflation.
The annual rate of core inflation, Dudley argued, “has peaked and we expect it to begin to decline later this year”. He added that inflation expectations “remain well anchored”.
Bernanke, who along with Dudley spearheaded the Fed’s unprecedented and easy policy steps, is set to deliver a public lecture on Tuesday.
A decision on such large-scale asset purchases would depend on how the economy evolves, and would take into account “costs and benefits”, Dudley added.
Dudley, an influential US Federal Reserve official, painted a mixed picture of the world’s largest economy, tempering recent signs the recovery is gaining speed with warnings that it could just as easily stall out.
He is a close ally of chairpersonn Ben Bernanke, but did not hint at what more, if anything, the Fed should do to encourage the recovery.
But Dudley said US economic activity is not yet strong or sustained enough to put a dent in the economy’s “slack”, which keeps the unemployment rate high at 8.3% despite a recent pickup in jobs.
“The incoming data on the US economy has been a bit more upbeat of late, suggesting that the recovery may be finally establishing a somewhat firmer footing,” Dudley said, citing expanding gross domestic product late last year, payrolls, sales of motor vehicles, and somewhat firmer housing starts.
Policy dove
“While these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods,” Dudley, a policy dove with a permanent vote on the Fed’s policy-setting committee, told a gathering of the Long Island Association.
The US central bank has kept interest rates near zero since late 2008 and bought $2.3 trillion in long-term securities to help revive the economy after the deep 2007-2009 recession.
Some good data so far this year has tempted some to say the recovery is well under way and that the Fed will take no further steps.
Yet Dudley, Bernanke and other policymakers have said more bond purchases remain an option.
Based on data for the first half of March, Dudley warned that higher petrol prices will further sap consumers’ purchasing power.
Other headwinds include impediments to the housing sector, fiscal drags at the federal and state levels, and risks that foreign growth is weaker than expected, he said.
Dudley’s comments come a week after a meeting in Washington in which the Fed’s policy-setting committee made no policy change and gave few clues how it interpreted the recent jobs growth, coupled as it has been with worries over overall growth and oil price-driven inflation.
The annual rate of core inflation, Dudley argued, “has peaked and we expect it to begin to decline later this year”. He added that inflation expectations “remain well anchored”.
Bernanke, who along with Dudley spearheaded the Fed’s unprecedented and easy policy steps, is set to deliver a public lecture on Tuesday.
