Tags: fed | dudley | policy | job

Fed's Dudley: Policy to Be 'Very Accommodative' as Weak Job Market Improves 'Only Slowly'

Monday, 25 Mar 2013 12:56 PM

 

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Federal Reserve Bank of New York President William C. Dudley said the central bank should maintain its asset purchases as a recovery in the labor market will take time to develop while federal budget cuts restrain economic growth.

“I expect that labor market conditions will improve only slowly and that inflation will remain muted,” Dudley said in prepared remarks for a speech to the Economic Club of New York. “Consequently, it will be appropriate for monetary policy to remain very accommodative.”

Dudley said that strength in housing and autos shows that the central bank’s $85 billion a month in bond purchases are “gaining additional traction” and boosting the economy more than he expected. If not for government cutbacks, the economy would be growing even more quickly, he said.

“I remain confident that the benefits of a stronger and earlier economic recovery will trump the costs associated with our unconventional monetary policy measures,” Dudley said.

As central bankers gauge whether their program is helping the labor market recover, they are also evaluating the costs and benefits of a stimulus program that has swelled the Fed’s balance sheet to a record $3.2 trillion.

Dudley said that there has been “some improvement in labor market conditions,” an assessment that’s less optimistic than the Fed’s pledge to continue the program until the labor market has improved “substantially.”

Dudley spoke less than a week after the Fed reaffirmed its bond purchases aimed at lowering the 7.7 percent unemployment rate. As president of the New York Fed, Dudley is the vice chairman of the Federal Open Market Committee and has a permanent vote on the panel.

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