| PROVIDENCE, R.I.
PROVIDENCE, R.I. Jan 15 Aggressive policy
easing will remain necessary for the simple reason that levels
of both U.S. unemployment and inflation are not where the
Federal Reserve wants them to be, a top U.S. central bank
official said on Tuesday.
In a textbook argument that appeared to push back at some of
his more hawkish peers, Boston Fed President Eric Rosengren
brushed aside concerns over inflation and made it clear that he
will support the central bank's efforts to relieve U.S.
joblessness, which was 7.8 percent last month.
Rosengren, a voting member of the Fed's monetary policy
panel this year, said the easing efforts have already encouraged
Americans to buy homes and cars and other goods that help spur
economic growth, for which he predicted an acceleration.
"Continued monetary accommodation is absolutely appropriate
and indeed needed as long as we are projected to miss on both
elements of the Fed's dual mandate, inflation and employment,"
he said in prepared remarks to the Greater Providence Chamber of
"Currently, inflation is somewhat below our 2-percent
target, and unemployment is well above a longer-run sustainable
rate," he added.
Last month, the U.S. central bank dug deeper into its
toolbox to announce it would keep its key interest rate near
zero until the unemployment rate dropped to 6.5 percent, as long
as inflation expectations remained below 2.5 percent.
The federal funds rate has been near zero since late 2008,
in the depths of the U.S. financial crisis that stunned the U.S.
economy and sparked a deep global recession.
Last month's interest-rate pledge comes even as the Fed buys
$85 billion in longer-term assets per month - effectively a
two-front effort by the central bank to spur investment and
growth three-and-a-half years after the end of the Great
Rosengren, a dovish policymaker, is for now aligned with the
majority of top Fed officials including Chairman Ben Bernanke,
who point out that easy monetary policies should raise inflation
and lower unemployment toward their stated goals.
But more hawkish officials argue that year after year of low
rates and the use of unconventional - and untested - policies
such as the asset buys set the stage for a run-up in inflation.
Kansas City Fed President Esther George and James Bullard,
of St. Louis - both of whom have a vote on policy this year -
expressed such reservations in speeches last week.
But Rosengren, who was among the first to call for the
latest round of quantitative easing (QE3) to avoid stagnation in
the labor market, charged on Tuesday "there has been no upward
trend in inflation."
The policymaker noted that Rhode Island, where he gave the
speech, in November still suffered an unemployment rate above 10
percent. The national jobless rate, meanwhile, has gradually
fallen to 7.8 percent from a crisis-era peak of 10 percent in
The "societal costs to elevated unemployment rates that are
falling only slowly show why accommodative monetary policy is
both appropriate and needed," Rosengren said, adding that a
stronger rebound in construction and manufacturing, for example,
would help get those with less education back to work.
U.S. GDP grew at a decent 3.1 percent in the third quarter,
the fastest pace since late 2011, though it is expected to have
slowed sharply in the last three months of the year.
Rosengren predicted economic growth would again pick up in
the first half of this year, and rise to closer to 3 percent in
the second half - assuming U.S. lawmakers do not disrupt the
economy as they decide on tax and spending policies, he said.
Turning to the ongoing fiscal debate in Washington,
Rosengren said the deliberations have already curbed business
investment. He added that government spending would be a "major
uncertainty" this year.
"While the need for long-run sustainable fiscal policy is
both clear and uncontroversial," he said, "I believe it is
important to achieve sustainability in a way that does not risk
the tentative economic improvements we have experienced to