Saturday, December 1, 2012

Fed officials spar on effectiveness of current monetary policies

CHICAGO (Reuters) - Federal Reserve policymakers sparred on Saturday over the U.S. central bank's unprecedented efforts to push down long-term borrowing costs, offering widely differing views on the effectiveness and costs of current policies.

"We are in a period where having low policy rates for a very long time would be helpful," Charles Evans, president of the Chicago Fed, said on a panel sponsored by the University of Chicago's Becker Friedman Institute for Research in Economics.

Evans, among the Fed's most dovish policymakers, repeated his call for keeping rates low until unemployment falls to at least 6.5 percent, as long as inflation does not threaten to rise above 2.5 percent.

But Charles Plosser, president of the Philadelphia Fed, who spoke on the same panel, said he is worried that the continuing high unemployment rate may mean the Fed's policies are not working as expected. He also expressed concern about the Fed's challenges when it comes time to reverse its low-rate policy.

"History suggest that it's always been easier for the Fed to lower rates than to raise them," Plosser said.

A third policymaker on the panel, Minneapolis Fed President Narayana Kocherlakota, sided with Evans.

"I think we are falling short on both metrics, more so on employment than inflation " he said, referring to the Fed's mandates to keep prices stable and to maximize employment.

Unemployment has remained stubbornly high, ticking up last month slightly to 7.9 percent.

(Reporting by Ann Saphir; Editing by Leslie Adler)

Source: http://news.yahoo.com/fed-officials-spar-effectiveness-current-monetary-policies-225741298--business.html

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