Fed's Dudley Predicts Faster Growth in 2014 as Fiscal Drag Wanes

Tuesday, 02 Jul 2013 01:06 PM

 

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Federal Reserve Bank of New York President William C. Dudley, who has supported record stimulus, said economic growth will probably quicken in 2014, possibly warranting a reduction in the central bank’s bond purchase program.

“A strong case can be made that the pace of growth will pick up notably in 2014,” Dudley, who serves as vice chairman of the Federal Open Market Committee and has never dissented from a monetary policy decision, said in remarks prepared for a speech in Stamford, Connecticut.

“The private sector of the economy should continue to heal, while the amount of fiscal drag will begin to subside,” Dudley said to the Business Council of Fairfield County, reiterating remarks in a June 27 speech in New York.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

Policy makers are debating when to dial back accommodation following comments by Chairman Ben S. Bernanke on June 19 that the Fed may cut $85 billion in monthly bond buying this year and halt purchases around mid-2014 if the economy meets central bank forecasts. Monthly buying of Treasurys and mortgage-backed securities has pushed up Fed assets to a record $3.48 trillion.

The New York Fed president repeated his comment last week that the central bank will probably prolong bond purchases if the economy turns out weaker than Fed forecasts.

“If labor market conditions and the economy’s growth momentum were to be less favorable than in the FOMC’s outlook — and this is what has happened in recent years — I would expect that the asset purchases would continue at a higher pace for longer,” Dudley said again.

Fed officials have said since starting a third round of quantitative easing in September that they’ll continue purchases until the labor market improves substantially. They’ll see new data about employment on July 5.

The Labor Department may say payrolls grew by 165,000 workers in June after rising by 175,000 in May, according to the median forecast of 84 economists in a Bloomberg survey.

The report probably will show the jobless rate retreated to 7.5 percent in June, matching April’s four-year low, from 7.6 percent a month earlier, according to the survey.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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