Tags: Fed | Rosengren | Rates | Growth

Fed’s Rosengren Says Lower Rates Still Able to Boost Growth

Wednesday, 16 Nov 2011 12:51 PM

Federal Reserve Bank of Boston President Eric Rosengren said that the central bank still has power to boost the economy through lower interest rates.

“The common misconception is that rates are already low so further monetary policy actions will have no impact on the economy,” Rosengren said in the text of a speech in Boston today. “In fact, statistical analysis suggests the opposite.”

Fed presidents this week differed over whether their outlook for the economy requires additional monetary easing. More action “may be needed” to reduce “persistently high unemployment,” San Francisco’s John Williams said yesterday in Scottsdale, Arizona. James Bullard of St. Louis said the central bank’s policy is “appropriately calibrated” and should only be loosened if the economy deteriorates.

Measures to add stimulus to the economy drew dissent from Philadelphia’s Charles Plosser, Narayana Kocherlakota of Minneapolis and Richard Fisher of Dallas at the Fed’s August and September meetings. A November decision to refrain from a third consecutive move drew dissent from Chicago’s Charles Evans.

Even small easing steps can be worthwhile when the economy is so badly damaged, Rosengren said today.

“While the scale of the problem is great, that should not dissuade us from actions that make even just ‘a dent,’” he said. “For instance, an action that reduces the unemployment rate by half a percent does not bring us close to full employment, and does not solve the country’s problems, but nonetheless would perhaps create roughly 750,000 jobs that may not have been created in the absence of the action.”


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Federal Reserve Bank of Boston President Eric Rosengren said that the central bank still has power to boost the economy through lower interest rates. The common misconception is that rates are already low so further monetary policy actions will have no impact on the...
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Wednesday, 16 Nov 2011 12:51 PM
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