Those Fed presidents really love giving speeches, don’t they?
After this week’s statements by four other regional presidents, who differed on both the economic outlook and their preferred policy recommendations, the NY Fed’s William Dudley seems to be throwing in with the QE2 camp (emphasis ours):
Currently, my assessment is that both the current levels of unemployment and inflation and the timeframe over which they are likely to return to levels consistent with our mandate are unacceptable. In addition, the longer this situation prevails and the U.S. economy is stuck with the current level of slack and disinflationary pressure, the greater the likelihood that a further shock could push us still further from our dual mandate objectives and closer to outright deflation.
We have tools that can provide additional stimulus at costs that do not appear to be prohibitive. Thus, I conclude that further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long.
Separately but not unrelated, we’ve noted previously the internal bickering going on at the Fed, which can make it harder to discern the future path of monetary policy. The Wall Street Journal has reported that the Fed is now considering a smaller-scale, open-ended approach to its asset purchases that was a kind of compromise resulting from the disagreement.
But on Thursday, Ben Bernanke directly addressed the issue of internal dissent, saying he actively encourages it. From Real Time Economics:
Bernanke leapt at a question about divisions inside the Fed to offer a window into his own thinking on decision-making — and his style of leadership.
“Disagreement is a good thing. It creates new ideas. It forces people to look at all sides of the question,” Bernanke said, pointing to research from university colleagues showing that for certain complex decisions, committees do a better job than a single person.
Not that it makes those decisions any easier.
Related links:
Dudley’s speech – NY Fed
Bernanke on Fed disagreements – Real Time Economics
So QE-asy it hurts – FT Alphaville