Boston Fed President Eric Rosengren said the central bank should reduce the pace of its bond-buying program very slowly over the next few years only when the economic data begins to meet Fed expectations.
Rosengren is known to be one of the more “dovish” Fed presidents, meaning in favour of accommodative monetary policy.
In a speech in Burlington, Vermont, Rosengren said “disappointing” economic data, a looming government shutdown, and the spike in long-term interest rates made it “premature to begin reducing the rate of Fed asset purchases” in September.
He said he was in full support of the central bank’s decision to not taper quantitative easing, a move that stunned markets.
“If the economy evolves as expected, policy should in my view include only a very slow removal of accommodation over the next several years,” Rosengren said. The move “should only occur when the data ratify our forecast for an improvement in real GDP and employment.”
Reducing accommodation prematurely would “risk slowing the sectors of the economy that have shown the greatest strength — the interest-sensitive sectors that have been most responsive to policy actions,” Rosengren said.
Read the whole speech at the Boston Fed’s website.