Fed's Rosengren: trimming bond-buying would be 'premature'

Wed Oct 2, 2013 4:45pm EDT
 
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By Ann Saphir

(Reuters) - Slow growth and a weak jobs market mean the U.S. economy will continue to need support from accommodative monetary policy for years to come, a top U.S. central banker said on Wednesday.

Boston Federal Reserve Bank President Eric Rosengren said he "strongly and unequivocally" supported the Federal Reserve's unexpected decision last month to keep up its $85-billion-a-month bond-buying stimulus, adding that reducing the program "would have been premature."

The current shutdown of the U.S. government, caused by a budget standoff between congressional Republicans and the White House, could further delay cuts to the program because the government is no longer producing official data on the economy, he said.

"It would make me less willing to remove accommodation until we had good data," Rosengren told the Lake Champlain Regional Chamber in South Burlington, Vermont. He added that at the time of the September decision he had expected lawmakers to avert a shutdown.

The Fed may even need to wait until after it gets data on October to assess any collateral damage from the shutdown and the coming fight over raising the U.S. government's debt limit, Rosengren said.

"It does put out further into the future the time when we can get a real assessment of where the economy is," he said.

The Fed, which has kept short-term rates near zero since December 2008, has been buying Treasuries and mortgage-backed securities to push down long-term borrowing costs and encourage investment and hiring.

"If the economy evolves as expected, policy should in my view include only a very slow removal of accommodation over the next several years - and that should only occur when the data ratify our forecast for an improvement in real GDP and employment," Rosengren told the Lake Champlain Regional Chamber in South Burlington, Vt.   Continued...

 
Boston Fed President Eric Rosengren speaks during the Sasin Bangkok Forum July 9, 2012. REUTERS/Sukree Sukplang