Tags: Eichengreen | Fed | ease | further

Cal Professor Eichengreen: 'Fed Could Do More' to Spur Growth

Monday, 07 May 2012 07:15 AM

By Dan Weil

While a large contingent of economists thinks the Federal Reserve should begin reversing its massive easing program, Barry Eichengreen, professor of economics at the University of California, Berkeley, believes the central bank should loosen policy further.

"There are always risks, but I think the risk of central banks not doing what they have been doing and exiting too soon are the risks to worry about," he tells Yahoo.

Eichengreen is worried about the tenuous nature of the U.S. economic rebound, with growth having slipped to 2.2 percent in the first quarter from 3 percent in the fourth quarter.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

"A lot of people are talking about the global liquidity glut,” he says. “I would question the premise.”

Nominal economic growth stands at its lowest rate since the Hoover administration, Eichengreen says. With fiscal policy on hold, the Fed has no choice but to act, he says. “The Fed could do more.”

And the professor thinks it will, probably buying more securities this summer in another round of quantitative easing.

“Central bankers "are right to be uncomfortable about the fact that they are the policymakers of last resort, but they are the only adults in the room," Eichengreen says.

Richmond Federal Reserve Bank President Jeffrey Lacker is one policymaker who disagrees with Eichengreen.

“Additional easing is unlikely to have much positive effect on growth prospects, but could well generate a sustained surge in inflation,” Lacker said in a speech last week.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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