Bloomberg News

Fed’s Rosengren Urges Easy Policy Until Unemployment Falls

October 19, 2011

(Updates with further quotes from fifth paragraph.)

Oct. 19 (Bloomberg) -- Federal Reserve Bank of Boston President Eric Rosengren said he favors setting unemployment and inflation markers that would trigger a pullback from near-zero interest rates.

“I think 2.5 percent or 3 percent inflation would certainly be grounds for taking away some of the accommodation,” Rosengren said in a CNBC interview. “And I would say getting the unemployment rate down to 7 percent, which some people have talked about, would certainly be a reason to remove some of the accommodation.”

Rosengren said exact figures would need to be settled on by policy makers. He was reacting to a proposal by Chicago Fed President Charles Evans to put more specific targets on what would drive a change in policy from interest rates near zero and a near-record balance sheet.

The Boston Fed president also said that “if the economy were to be weaker than most people are forecasting, that would certainly be cause for doing additional monetary policy.”

More asset purchases are “certainly a possibility,” he said. “It partly depends on what you think the likelihood of a bad economic shock is.”

The threat of falling prices would be one condition that might bring more purchases, Rosengren said. “That wouldn’t necessarily be the only condition.”

Rosengren said recent U.S. economic forecasts have been revised upward, which is a “positive sign,” and the economy may grow more quickly next year.

“At 2.5 percent to 3 percent next year, I think, would be quite reasonable,” he said. Still “the risks still remain weighted toward the downside.”

--Editors: Kevin Costelloe, Paul Badertscher

To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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