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Fed’s Rosengren Urges ‘Open-Ended’ Easing Program

August 07, 2012

Fed’s Rosengren Says ‘Open-Ended’ Easing Is Needed for Jobs

Federal Reserve Bank of Boston President Eric Rosengren said the central bank should pursue an “open-ended” quantitative easing program of “substantial magnitude” to boost growth and hiring amid a global slowdown. Photographer: Brendan Hoffman/Bloomberg News

Federal Reserve Bank of Boston President Eric Rosengren said the central bank should pursue an “open-ended” quantitative easing program of “substantial magnitude” to boost growth and hiring amid a global slowdown.

The Fed should set its guidance based on the economic outcomes it seeks and focus on buying more mortgage-backed securities, Rosengren said today in a CNBC interview. Without new stimulus, the jobless rate would rise to 8.4 percent at the end of this year and economic growth wouldn’t exceed its 1.75 percent average in the first half of the year, he said.

“What I would argue for actually is to have it open-ended, that we focus on economic outcomes,” Rosengren said. “It would be setting a quantity that you’re going to continue to buy until you get the economic outcomes that you want.”

Additional accommodation is necessary because unemployment remains at the same 8.3 percent level it was in January even after the central bank has purchased $2.3 trillion in bonds and held its main interest rate near zero since December 2008, Rosengren said. The Boston Fed chief doesn’t have a vote on the policy-setting Federal Open Market Committee this year.

A new easing program “needs to be substantial enough that it offsets some of the shocks that we’re getting from abroad and some of the concerns that people have with how weak the world economy has been,” Rosengren said. “We’re in a global slowdown. That would argue for a quantitative easing program, and one of sufficient magnitude that it has an impact.”

Operation Twist

The FOMC said Aug. 1 it will continue swapping $667 billion of short-term debt with longer-term securities to lengthen the average maturity of its holdings, an action dubbed Operation Twist. Policy makers also said they will “closely monitor” economic data. The FOMC next meets on Sept. 12-13.

“We want a stronger economy, we want faster growth in the incomes and we want a labor market that has an unemployment rate that’s clearly declining,” Rosengren said. “If you’re treading water even if you’re a good swimmer at some point you need to get to land.”

Rosengren, 55, was formerly the head of banking supervision and regulation at the Boston Fed and became its president in 2007. Fed presidents rotate voting on monetary policy, with Rosengren next holding a seat in 2013.

He said that he disagrees with any suggestion that policy makers shouldn’t take action in the meetings just before the U.S. presidential election on Nov. 6 because it may create a perception that the central bank is taking sides politically.


“We’ve found that the economy has not grown as fast as we’d hoped and as a result I think it is an appropriate time to take stronger action,” Rosengren said. “A nonpartisan Federal Reserve should not be worried about the political cycle, it should be worried about the business cycle.”

The European Central Bank is making progress in containing the region’s sovereign debt crisis, Rosengren said. ECB President Mario Draghi said Aug. 2 that the central bank may step up its response to the crisis by intervening in bond markets in tandem with Europe’s rescue fund. He didn’t signal imminent action.

“It seems like a reasonable start to a program that tries to get the problems that the sovereigns are having under control,” Rosengren said. “There are plenty more steps they have to do and there’s not going to be any one solution for the European problem. It’s going to have to be a series of actions that they’re taking to get a more unified fiscal solution.”

To contact the reporters on this story: Caroline Fairchild in New York at; Jeff Kearns in Washington at

To contact the editor responsible for this story: Chris Wellisz at

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