NEW YORK Eric Rosengren, the head of the Federal Reserve Bank of Boston, said the U.S. central bank could continue buying assets into early next year if the labor market improves only gradually, as he expects.
In a phone interview on Tuesday, the dovish Fed policymaker cautioned that any decisions on bond-buying will be based on how the tepid U.S. economic recovery unfolds through this year.
Rosengren's personal prediction is for Gross Domestic Product (GDP) growth of roughly 3 percent in the second half of this year. That, he said, is probably not enough to lower the jobless rate to about 7.25 percent, which he sees as sufficient improvement to halt the so-called quantitative easing program dubbed QE3.
The likely unemployment rate at the time "would probably be a little bit higher than the 7.25 percent unemployment that I'd probably like to see before I'd stop the asset purchase program," Rosengren said. "But I hope I'm wrong - I'd like to see the economy grow more rapidly.
"I would be pleased to have the asset purchase program ending earlier," added Rosengren, a voter this year on Fed policy.
U.S. unemployment stood at 7.8 percent last month, down from 8.5 percent a year earlier and from a crisis-era peak of 10 percent in 2009.
The U.S. economy grew at a respectable 3.1 percent annual rate in the third quarter, but growth is expected to have slowed in the final months of the year. The Fed expects GDP growth of between 2.3 to 3.0 percent this year.
To boost growth and get Americans back to work in the wake of the Great Recession, the Fed has kept interest rates near zero since late 2008 and has bought some $2.5 trillion in assets. Last month it said it expected to keep rates that low at least until the jobless rate falls to 6.5 percent, as long as inflation expectations remain below 2.5 percent.
Rosengren, who supports a continuation of this policy accommodation, said if the economy picked up steam, QE3 could be halted six to nine months before the 6.5-percent jobless level is reached.
(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)