Asset purchases would depend on economy: Fed president

Federal reserve Bank of New york president William dudley said the central bank may prolong its assetpurchase program if the economy’s performance fails to meet the Fed’s forecasts.

“If labour market conditions and the economy’s growth momentum were to be less favourable than in the FOMC’s [federal open market committee’s] outlook — and this is what has happened in recent years — I would expect that the asset purchases would continue at a higher pace for longer,” Mr. dudley said Thursday in New york.

He serves as vice-chairman of the FOMC and has never dissented from a monetary policy decision.

Mr. dudley also said any decision to reduce the pace of asset purchas- es wouldn’t represent a withdrawal of stimulus, and that an increase in the Fed’s benchmark interest rate is “very likely to be a long way off.” The economy may also diverge from the Fed’s forecasts, he said.

Concerns the Fed may curtail accommodation helped push the yield on the 10-year Treasury note to as high as 2.61% this week from as low as 1.63% in May.

Mr. dudley joined other Fed policymakers this week in seeking to dampen expectations that an increase in the benchmark interest rate will come sooner than previously forecast.

“Let me emphasize that such an expectation would be quite out of sync with both FOMC statements and the expectations of most FOMC participants,” said Mr. dudley, 60, a former chief u.S. economist for Goldman Sachs Group Inc.

Stocks extended gains after Mr. dudley’s comments, with the S&P 500 index climbing 0.8% to 1,616.26 at 1:03 p.m. in New york. The yield on the 10-year Treasury note fell to 2.48% from 2.54% late Wednesday.

Speaking in Washington, Fed governor Jerome Powell said the Fed’s asset purchases may be scaled back later this year if growth holds up, and any such trimming depends on economic data rather than the calendar. “In all likelihood, the current” largescale asset purchases “will continue for some time,” he said.