Fed official: End QE on schedule

by Rachel.Norvell22 Oct 2014
President of the Federal Reserve Bank of Boston Eric Rosengren has said the Federal Reserve should not let the recent financial market turmoil affect the agency’s pledge to end its bond-buying program.

In an interview with the Financial Times, Rosengren said recent volatility in the financial markets doesn’t bother him. What does is if the market starts to experience “long-term rates trending well below our inflation target -- that is a warning signal.”

He added that the Fed’s bond purchases had achieved their purpose and that the focus should be more on the economy, rather than on Wall Street.

In the interview, Rosengren suggested that not everyone is on board with a plan put forward by James Bullard, president of the St. Louis Fed, to keep buying bonds at a pace of $15 billion a month until December.

Stock market selloffs, fears that Europe’s faltering economy will create drag for the rest of the world and perhaps even Ebola scares made for an interesting last week. The weak market helped drive down mortgage rates to their lowest levels in 16 months, as investors sought a safer place to park their money -- in mortgage bonds.

The recent volatility in financial markets reinforces the need for the Fed to be patient with its policy stimulus and to clearly tie an eventual interest-rate rise to improving economic conditions, Rosengren told Reuters. He added that while it would take a few more weeks to understand the real economic fallout from the market selloff, he could "easily imagine" a scenario in which the U.S. central bank keeps rates near zero until 2016.

Click here to read the Financial Times full interview with Rosengren.



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