CHICAGO (Reuters) - Federal Reserve officials are divided over the need for more accommodation to ensure the economic recovery gains enough velocity to pull free from its stop and start slog, despite rock-bottom interest rates for more than three years and $2.3 trillion in bond purchases designed to stimulate growth.
Some Fed officials see the persistently dismal housing sector as the key culprit in the slow recovery, and are pushing for targeted policies to boost the sector. Those on the central bank’s hawkish wing warn that more easing is at best ineffective and at worst could spark inflation.
The following is a look at where each stands on a scale of 1 to 5, with “1” signifying doves most likely to support further monetary easing, and “5” representing hawks most likely to oppose it.
1 -- CHICAGO FED PRESIDENT CHARLES EVANS (2013 voter)
Evans is among the Fed’s most aggressive doves, calling for the Fed to keep interest rates near zero until the jobless rate falls below 7 percent, as long as inflation does not rise above 3 percent. If that does not work fast enough, Evans has said repeatedly, the Fed should go back to buying bonds to drive down borrowing costs. “There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape,” he said on December 6. In 2011 Evans twice dissented on Fed policy decisions, calling for more action when the rest of the committee agreed to stand pat.
1 -- NEW YORK FED PRESIDENT WILLIAM DUDLEY (permanent voter)
A key Bernanke ally, Dudley has suggested the Fed could do more to help the housing sector, and the economy more broadly, with further bond purchases. “Because the outlook for unemployment is unacceptably high relative to our dual mandate and the outlook for inflation is moderate, I believe it is also appropriate to continue to evaluate whether we could provide additional (policy) accommodation in a manner that produces more benefits than costs, regardless of whether action in housing is undertaken or not,” Dudley said on January 6.
1 -- FED GOVERNOR DANIEL TARULLO (permanent voter)
In his first speech on the economic outlook since his appointment in 2009 by President Barack Obama, Tarullo argued in October that more should be done to help the country’s jobless crisis. “I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities,” Tarullo said on October 20. “There is need, and ample room, for additional measures to increase aggregate demand in the near to medium term, particularly in light of the limited upside risks to inflation over the medium term.
1 -- FED VICE CHAIR JANET YELLEN (permanent voter)
As the second-in-command on the Fed’s policy-setting panel, Yellen is also one of its most dovish members. “The scope remains to provide additional accommodation through enhanced guidance on the path of the federal funds rate or through additional purchases of long-term financial assets,” she said on November 29. The Fed will begin providing forecasts for short-term rates at its January 2012 meeting.
1 -- BOSTON FED PRESIDENT ERIC ROSENGREN (2013 voter)
Rosengren is a reliable dove, and appears likely to support more easing, particularly if it can be targeted to help specific sectors. “Given the low inflation rate and weak labor markets that are both likely to persist this year, I believe the Federal Reserve should continue to explore ways to promote more rapid recovery through stronger growth,” he said on January 6. “Further purchases of mortgage-backed securities would in my view help provide a more rapid recovery in housing, by reducing the costs of refinancing or purchasing new homes.”
2 -- FED GOVERNOR ELIZABETH DUKE (permanent voter)
Duke has stood with Bernanke and the majority of the Fed’s policy-setting panel on all recent decisions. While she has not specifically called for the Fed to buy more bonds, she has focused on the fragile state of the housing market, and has urged policymakers broadly to do more. “Policymakers should at least consider policies that take into account the role the GSEs could play in hastening the healing of the housing market rather than focusing entirely on minimizing losses to the GSEs,” she said on January 6.
2 -- FED GOVERNOR SARAH RASKIN (permanent voter)
Raskin, an Obama appointee, supported the Fed’s recent moves to ease policy, and on September 26 said it would be wrong to conclude from the muted effect of aggressive Fed policies so far that central bank actions are useless. “The opposite conclusion might well be the case--namely, that additional policy accommodation is warranted under present circumstances.” Still, she said, she would be “quite leery” of one approach to easing floated by colleagues: allowing inflation to rise above the Fed’s 2 percent target. “Keeping inflationary expectations anchored is in my mind extremely important,” she said.
2 -- CLEVELAND FED PRESIDENT SANDRA PIANALTO (2012 voter)
Pianalto has supported the Fed’s bond-buying programs. “Our policy is appropriate in this economic environment; it is supporting a stronger recovery while ensuring that inflation remains consistent with our mandate,” Pianalto said on November 17. Still, she has also emphasized the Fed’s limited ability to affect the labor market, and her forecast of 2 percent inflation for the next two years appears to leave little leeway for the Fed to undertake more easing without lifting inflation above the central bank’s implicit target rate.
2 -- SAN FRANCISCO FED PRESIDENT JOHN WILLIAMS (2012 voter)
Williams believes the central bank will need to buy more bonds if his forecast for subpar growth and low inflation pans out. “Unemployment is going to be sustained above a reasonable estimate of the natural rate of unemployment, which is closer to 6.5 percent than the 8.5 percent that we have now. That does make an argument that we should have more stimulus,” he in January.
3 -- FED CHAIRMAN BEN BERNANKE (permanent voter)
Under Bernanke’s leadership, the Fed’s policy-setting Federal Open Market Committee launched two fresh rounds of monetary easing last year, signaling in August that it is likely to hold short-term interest rates near zero through mid-2013, and in September announcing a $400 billion program to reweight its balance sheet with longer-term securities. Since then it has kept policy on hold, although starting in January 2012 will take the added step of publishing forecasts for short-term rates, which may further push back expectations of when rates will rise. “I’m not a believer in the Old Testament theory of business cycles. I think that if we can help people, we need to help people,” Bernanke said on November 10.
3 -- ATLANTA FED PRESIDENT DENNIS LOCKHART (2012 voter)
Lockhart saw the Fed’s “Operation Twist,” announced in September, as providing a moderate boost to the economy, but has signaled he would not support more Fed bond-buying unless financial conditions worsened. “I am skeptical that further asset purchases will produce much gain in terms of increased economic activity,” he said on November 29.
3 -- ST. LOUIS FED PRESIDENT JAMES BULLARD (2013 voter)
Bullard has been supportive of the Fed’s various bond-buying programs, but in January suggested more bond buying may not be in the cards. “I don’t think it’s very likely right now because the tone of the data has been pretty strong,” he said on January 7. He also signaled his support for an explicit inflation target, which would permit the Fed to take further action to stimulate growth if needed without losing its inflation-fighting credibility.
4 -- MINNEAPOLIS FED PRESIDENT NARAYANA KOCHERLAKOTA (2014 voter)
One of three policymakers to dissent last year on the Fed’s moves to ease policy, Kocherlakota has argued that economic conditions have improved since the last time the Fed decided to buy bonds, and therefore the Fed should be tightening policy, not easing it. “If we use more accommodative policy, we are trying to use it to lower the long-term unemployment rate,” he said on December 20. “The tradeoff between long-term unemployment and inflation might well be quite different from -- it might well cost us too much. I’m not saying that’s true, but it’s something we should be very careful about.”
5 -- DALLAS FED PRESIDENT RICHARD FISHER (2014 voter)
A self-described inflation hawk, Fisher has been an outspoken opponent of further monetary easing, saying the Fed has done its part and any further help to the economy must come from the fiscal authorities. “From my standpoint, resorting to further monetary accommodation to clean out the sink, clogged by the flotsam and jetsam of a jolly, drunken fiscal and financial party that has gone on far too long, is the wrong path to follow,” he said on December 16.
5 -- PHILADELPHIA FED PRESIDENT CHARLES PLOSSER (2014 voter)
An outspoken inflation hawk and skeptic on the effectiveness of Fed bond purchases, Plosser dissented on the Fed’s easing last year, and has warned that further stimulus could spark inflation. “Central banks are under increasing pressure to act, both because fiscal authorities have been unable to make credible commitments to maintain fiscal discipline and because central banks have been willing to engage in actions that stray into the realm of fiscal policy -- for example, purchasing assets of the housing sector,” he said on December 2.
5 -- RICHMOND FED PRESIDENT JEFFREY LACKER (2012 voter)
Like Plosser, Lacker believes that more easing at this point would do more harm than good. “I’m hard pressed to see the rationale for further monetary stimulus,” Lacker said on December 19. “The doubling of inflation this year, despite unemployment averaging 9 percent, undercuts the hoary notion that ‘slack’ in the labor market can be counted on to keep inflation contained.
5 -- KANSAS CITY FED PRESIDENT ESTHER GEORGE (2013 voter)
George took the reins at the Kansas City Fed on Oct 1, and her personal views on monetary policy are not widely known. She has spent nearly all of her career since 1982 at the institution, which was long run by one of the Federal Reserve System’s most persistent hawks, Thomas Hoenig.
Reporting by Ann Saphir, Mark Felsenthal, Pedro Nicolaci da Costa, Jonathan Spicer; Editing by Andrew Hay
Our Standards: The Thomson Reuters Trust Principles.