Stiglitz: Too Soon for Fed to Ease Off the Accelerator

Sunday, 26 May 2013 12:25 PM

 

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Nobel Prize-winning economist Joseph Stiglitz said it would be premature for the U.S. Federal Reserve to reduce monetary stimulus even if there's little evidence it helped the world's largest economy.

"It's the only stimulus," the Columbia University professor said in an interview at the World Economic Forum in Jordan Saturday. "Clearly the economy is not back to normal, and to accept this as the new normal would be really wrong."

U.S. stocks dropped last week, and Treasuries fell for a fourth week, the longest slide since August, after Chairman Ben S. Bernanke said the Fed may cut the pace of asset purchases if policy makers see indications of sustained growth. Orders for durable goods increased more than forecast in April, signaling the economy will get a lift in the second half of the year.

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Gross domestic product may expand 2.7 percent in 2014, the fastest pace since 2006, according to the median estimate of 83 economists on Bloomberg.

What makes the debate over the Fed’s stimulus difficult is that "the evidence that it provided much stimulus to the economy is very weak," Stiglitz said. "It may have contributed to asset price bubbles, it may have contributed a little bit to the weaker dollar, which actually helps U.S. exports."

Stiglitz is a former chief economist of the World Bank, and has worked as a member and chairman of the White House Council of Economic Advisers. He won his Nobel Prize in economics in 2001.

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