Fed's Rosengren sees little inflation risk from QE

Reuters News
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Posted: Aug 07, 2012 9:41 AM

WASHINGTON (Reuters) - Boston Federal Reserve Bank President Eric Rosengren on Tuesday repeated his call for the U.S. central bank to expand monetary policy, saying the economy is only treading water and inflation is not a problem.

In an interview on CNBC, Rosengren said he had not seen inflationary pressures from the two previous massive bond purchase programs of the Fed, known as quantitative easing.

"There are a number of areas where quantitative easing can help," he said. "One, it does push up asset prices. ... A second area is the housing market," he added.

Stock market gains that have followed Fed quantitative easing announcements have increased consumption, he said. Recent improvements in the housing market are in part a reflection of the Fed's aggressive efforts to pull down longer-term interest rates, he added.

He also said since he did not expect the economy to improve in the second half of the year, another bond buying program was needed.

Rosengren was also quoted in an interview in the New York Times on Tuesday calling for more quantitative easing.

The Fed at its most recent meeting took no new action to stimulate growth despite a flagging recovery but said it stands ready to ease financial conditions if necessary.

Despite improved U.S. hiring last month, most Wall Street economists still expect the Fed to launch another round of monetary stimulus this year, with the majority expecting it to act as soon as September.

Fed Chairman Ben Bernanke is due to speak at a town hall meeting on financial literacy later on Tuesday. Many analysts expect Bernanke to use a speech at the Fed's annual Jackson Hole conference later this month to lay out the next steps for policy.

(Reporting by Mark Felsenthal; Editing by Neil Stempleman)