Fed should press on with QE amid lim­ited risks: Yellen

The Pak Banker - - FRONT PAGE -

Fed­eral Re­serve Vice Chair­man Janet Yellen said the Fed should press on with $85 bil­lion in monthly bond buy­ing while track­ing pos­si­ble costs and risks from the un­prece­dented pro­gram.

“Turn­ing to the po­ten­tial costs of the Fed­eral Re­serve’s as­set pur­chases, there are some that def­i­nitely need to be mon­i­tored over time,” Yellen said Mon­day in a speech in Washington. “At this stage, I do not see any that would cause me to ad­vo­cate a cur­tail­ment of our pur­chase pro­gram.”

“I view the bal­ance of risks as still call­ing for a highly ac­com­moda­tive mon­e­tary pol­icy to sup­port a stronger re­cov­ery and more-rapid growth in em­ploy­ment,” Yellen said in the text of re­marks to the Na­tional As­so­ci­a­tion for Busi­ness Eco­nom­ics an­nual pol­icy con­fer­ence, ex­tend­ing a de­bate on the Fed­eral Open Mar­ket Com­mit­tee about when to ta­per the bond buy­ing to avert ex­ces­sive risk tak­ing.

Fed Gov­er­nor Jeremy Stein said last month that some credit mar­kets, in­clud­ing lever­aged loans and junk bonds, show signs of over­heat­ing. Kansas City Fed Pres­i­dent Es­ther Ge­orge has warned that prices of some farm land have hit “his­tor­i­cally high lev­els.”

“At this stage, there are some signs that in­vestors are reach­ing for yield, but I do not now see per­va­sive ev­i­dence of trends such as rapid credit growth, a marked buildup in lever­age, or sig­nif­i­cant as­set bub­bles that would clearly threaten fi­nan­cial sta­bil­ity,” Yellen said.

She also said that end­ing the Fed’s bond-buy­ing too soon could dampen the out­look for growth. “End­ing as­set pur­chases be­fore ob­serv­ing a sub­stan­tial im­prove­ment in the la­bor mar­ket might also cre­ate ex­pec­ta­tions that the amount of ac­com­mo­da­tion pro­vided would not be suf­fi­cient to sus­tain the im­prove­ment in the econ­omy,” Yellen said.

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