Tags: Fed | Pianalto | Risks | Action

Fed's Pianalto Sees Risks to More or Less Policy Action

Thursday, 01 March 2012 08:39 AM

The U.S. Federal Reserve faces risks either if it takes more policy action or if it withdraws monetary accommodation, so the central bank's "already quite accommodative" stance is fine for now, a top U.S. Federal Reserve official said on Thursday.

"In my assessment, doing more at this time could create too much inflation risk and doing less could risk weakening an already slow expansion and causing an unwelcome disinflation," Cleveland Fed President Sandra Pianalto said at an event hosted by The City Club of Cleveland event.

Pianalto, a voting member this year on the Fed's policy-setting panel, added: "Still, the recent spike in oil prices and housing rents could complicate the inflation picture if they persist."

The comments align Pianalto with Chairman Ben Bernanke, who at a congressional hearing on Wednesday defended the Fed's aggressive steps in the last few years to revive the economy after a brutal recession.

Others both inside and outside the Fed either want it to do more to kick-start the slow recovery, or to begin to unwind its unprecedented actions.

Pianalto on Thursday backed a January statement by the Fed's policy-setting committee, in which it said it expected to keep rates exceptionally low at least through late 2014.

"I would prefer nothing more than to support an increase in interest rates before late 2014 on the basis of a brighter outlook for economic growth - but I'm not there yet," she said.

Pianalto is a moderate dove typically in line with Bernanke's core of policymakers who have kept interest rates near zero since late 2008 and bought some $2.3 trillion in longer-term securities to help lower unemployment, which is now at 8.3 percent.

Earlier this week, she said it could take up to five years to bring the rate down to 6 percent again.

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Thursday, 01 March 2012 08:39 AM
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