Tags: fed | easing | economy | weak

Cleveland Fed President: Continued Weak Data May Warrant More Easing

Wednesday, 18 Jul 2012 07:09 AM

If more disappointing economic indicators continue to hit the wire, the Federal Reserve will likely stimulate the economy via monetary easing tools, such as bond buybacks from banks that pump liquidity into the system to spur recovery, Federal Reserve Bank of Cleveland President Sandra Pianalto said Tuesday.

Poor monthly jobs reports, sluggish retail sales figures and soft consumer sentiment data have sparked talk the Federal Reserve will intervene and snap up debt from banks, officially known as quantitative easing.

"If recent weak economic data persist and cause my outlook for economic growth and inflation to become weaker than I currently anticipate, additional policy actions could be warranted," Pianalto said, according to a copy of a speech she delivered to the Economic Research Institute of Erie posted on the bank's site.

Editor's Note: You Deserve to Know What Obama and Bernanke Are Hiding From Americans

“My outlook is subject to considerable uncertainty, since any number of better or worse scenarios could actually materialize,” Pianalto added.

“There is no substitute for constantly assessing incoming information, updating forecasts, and evaluating the costs and benefits of our policy options.”

Pianalto holds a vote on the Federal Open Market Committee (FOMC), the Fed's interest-rate body.

Her comments echoed those from Fed Chairman Ben Bernanke, who appeared before the Senate Banking Committee on Tuesday.

While the Fed stands ready to juice the economy via easing measures, it remains on standby for now unless economic recovery deteriorates further.

"Reflecting its concerns about the slow pace of progress in reducing unemployment and the downside risks to the economic outlook, the Committee made clear at its June meeting that it is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," Bernanke told lawmakers.

Since the downturn, the Federal Reserve has rolled out two rounds of quantitative easing, buying $2.3 trillion in Treasury holdings and mortgage-backed securities from banks with the aim of pushing interest rates down to encourage investment and hiring.

Supporters says the policy tool steers the country away from deflationary decline and encourages job creation.

Critics say the measure is basically printing money out of thin air that plants the seeds for inflation down the road.

Markets pay close attention to talk of easing since the tool jolts the economy by liquidity injections that send stocks rising, though many weren't surprised with Bernanke's wait-and-see approach he displayed in Congress.

"The markets weren't expecting much - and they did not get much in the way of specific new policies from Bernanke," said Cary Leahey, economist and managing director at Decision Economics, according to Reuters.

"The Chairman has to represent the view of the FOMC, not just his own views, and Bernanke is not willing to 'wander off the reservation' the way (former Fed Chairman Alan) Greenspan did and make policy recommendations without fully checking them out with the FOMC."

Editor's Note:
You Deserve to Know What Obama and Bernanke Are Hiding From Americans

 

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2012-09-18
Wednesday, 18 Jul 2012 07:09 AM
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