Pianalto said in a speech April 2 that further monetary stimulus could put the central bank’s inflation goal “at risk,” and that the Fed’s current stance is “best suited to foster steady gains in output and employment and to maintain stable prices.”
The Federal Reserve Bank of New York’s survey of primary dealers conducted before policy makers met last month showed that the firms saw the probability of another round of bond buying declining from January.
The median respondent saw a 50% chance that the Fed would expand its balance sheet through securities purchases within one year, down from 55% odds in the survey conducted before the Federal Open Market Committee’s Jan. 24-25 meeting, results released yesterday by the New York Fed showed.
The Fed presidents, while backing away from stimulus, aren’t removing it as an option.
“Relative to a few months ago, I think that the downside risks to the U.S. economy have lessened,” Williams said yesterday in San Francisco. Still, another round of asset purchases is “not off the table.”
Fed Chairman Ben S. Bernanke has maintained a cautious tone on the economy since the March meeting, saying in an interview last week with ABC News television that “it’s far too early to declare victory.”
Asked if another round of quantitative easing, or large- scale bond purchases, remains “on the table,” the Fed chief said, “we don’t take any options off the table” and “we have to be prepared to respond to however the economy evolves.”
Policy makers at last month’s FOMC meeting raised their assessment of the economy as the labor market strengthened, and refrained from taking new action to cut borrowing costs. The Fed next meets April 24-25.
Richmond’s Lacker, also appearing in an interview with Bloomberg Television’s Trish Regan, said a U.S. law restricting proprietary trading at banks and scheduled for enactment in July may be “impossible to implement.”
The so-called Volcker rule, named for its original champion, former Fed Chairman Paul Volcker, is aimed at reducing the odds that banks will make risky investments with their own capital and put depositors’ money at risk. Lacker said bank trading books were “kind of tangential” to the financial crisis of 2008-2009, when bank capital was eroded by losses on risky mortgages, many of them bundled into complex securities.