Tags: Fed | Dudley | Job | Inflation | Picture | Unsatisfactory

Fed's Dudley: Job, Inflation Picture Unsatisfactory

Tuesday, 19 Oct 2010 09:44 AM

U.S. employment and inflation are likely several years away from being within the Federal Reserve's comfort zone, a top Fed official said Tuesday.

"Viewed through the lens of the Federal Reserve's dual mandate — the pursuit of the highest level of employment consistent with price stability, the current situation is wholly unsatisfactory," said William Dudley, president of the New York Fed, reiterating an argument he made earlier this month.

Dudley said at a press briefing that the momentum of the U.S. recovery has slowed. Job creation is too weak to significantly bring down a jobless rate, currently at 9.6 percent, and the rate of inflation has fallen, he said.

Dudley said monetary and regulatory policy can support economic activity by making investments to create jobs more attractive and making the financial system safer.

But Dudley, who in a speech earlier this month put himself squarely in the camp that says monetary policy can and should do more to support the recovery, did not provide further details on the policy outlook. The president of the New York Fed has a permanent vote on the policy-setting Federal Open Market Committee.

Dudley said the situation in housing remains uncertain for the foreseeable future. While borrowers are becoming less likely to fall behind on their mortgages, major lenders have acknowledged serious problems in their foreclosure processes.

Several banks imposed moratoriums following allegations that they failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties.

The controversy has drawn public outrage and sparked government investigations.

Dudley said the Fed encourages alternatives to foreclosures, such as loan modifications. But, he said, foreclosures play an important role in getting the housing market back on track.

"It is important that foreclosures that properly comply with state and federal law can ultimately take place, as this is a necessary part of the adjustment that will eventually return us to more normal conditions in the housing market," he said.

Dudley said the Fed is closely monitoring the issue to see if there is "any potential impact on the housing market, financial institutions and the overall economy."

Consumer spending is another sector that is experiencing sluggishness, Dudley said, adding that it is hard to tell how far along the process is of household develeraging.

He said he expects the increased rate of mortgage refinancing to continue in the near term.

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U.S. employment and inflation are likely several years away from being within the Federal Reserve's comfort zone, a top Fed official said Tuesday. Viewed through the lens of the Federal Reserve's dual mandate the pursuit of the highest level of employment consistent...
Fed,Dudley,Job,Inflation,Picture,Unsatisfactory
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2010-44-19
Tuesday, 19 Oct 2010 09:44 AM
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