* George sees US growth above 2 pct; Bullard sees 3.2 pct
* George sees U.S. unemployment down 0.5 pct point this year
* Bullard sees unemployment falling to 6.5 pct in mid-2014
* Analyst sees George as hawkish dissenter for 2013
* Kocherlakota says Fed has tools to control inflation
By Ann Saphir and Alister Bull
MADISON, Wis./KANSAS CITY, Mo., Jan 10 Two top
Federal Reserve policymakers expressed discomfort on Thursday
with the U.S. central bank's easy monetary policy, in comments
suggesting Fed Chairman Ben Bernanke may face more dissent this
In remarks that stamped her as a hawk on the Fed's
policy-setting committee, Kansas City Federal Reserve President
Esther George warned that the Fed's near-zero interest-rate
policy - aimed at boosting the economy - could spark inflation.
"A prolonged period of zero interest rates may substantially
increase the risks of future financial imbalances and hamper
attainment of the 2 percent inflation goal in the future," she
said in her most extensive remarks in a year on policy.
"Monetary policy, by contributing to financial imbalances
and instability, can just as easily aggravate unemployment as
heal it," she said in a speech in Kansas City.
That stance is hardly representative of other influential
officials at the central bank, including Bernanke and the vice
chair, Janet Yellen.
Their view was more closely captured by comments from
Narayana Kocherlakota, who noted inflation was forecast to
remain below the central bank's 2 percent target for the
foreseeable future, even by the Fed's own estimates.
"This forecast suggests that, if anything, monetary policy
is currently too tight, not too easy," he said in remarks in
Last month, the Fed voted to keep up asset purchases at an
$85 billion monthly pace to lower borrowing costs and spur
hiring. It said it would continue that policy, called
quantitative easing, until it saw substantial improvement in the
labor market outlook.
U.S. central bankers also pledged to hold interest rates
near zero until unemployment falls to 6.5 percent, provided
inflation does not threaten to rise above 2.5 percent.
George will cast her first vote this month on monetary
policy since taking the helm at the Kansas City Fed in October
2011, while Kocherlakota is not a voter this year.
"The latest remarks from Kansas City Fed's Esther George
have cemented the presence of a hawkish dissenter on the FOMC in
2013, with Richmond Fed's (Jeffrey) Lacker passing along the
hawkish torch," said Gennadiy Goldberg, U.S. strategist at TD
Lacker was the lone dissenter on the Fed's policy-setting
panel last year.
'VERY AGGRESSIVE POLICY'
St. Louis Fed President James Bullard, who votes as well
this year on U.S. monetary policy, also warned about the
potential for inflation, although he noted that inflation was so
far running under the Fed's 2 percent goal.
"It is a very aggressive policy and it is making me a little
bit nervous that we are overcommitting to the easy policy," he
told reporters after a speech to the Wisconsin Bankers
Association in Madison. "We are taking risk."
As Fed officials mull when to reduce or end the asset buying
- some, including Bullard, say that could happen this year -
the debate may focus on potential inflation as well as the
outlook for the economy.
On the latter front, George was decidedly more downbeat than
Bullard, saying she expected the U.S. economy to grow just above
2 percent in 2013, while unemployment falls about another half
Bullard sees growth at 3.2 percent this year and next, he
said Thursday, and sees the jobless rate dropping to 6.5 percent
- the Fed's threshold for rethinking its low-rate policy - by
the middle of next year. The U.S. jobless rate in December was
Kocherlakota predicts U.S. gross domestic product will
expand at an annual pace of 2.5 percent in 2013 and 3 percent
next year, estimates that put him on the weak end of Fed
"This growth will do little in terms of returning the
economy to the historical trend," Kocherlakota said in prepared
remarks to a Minneapolis Fed event. "Consistent with this slow
output growth, I expect unemployment to continue to fall only
Minutes from the Fed's December meeting suggested George,
while definitely on the hawkish end of the central bank's policy
views, was not alone.
They said several voting FOMC members were concerned about
possible risks to financial stability from the Fed's prolonged