Federal Reserve Bank of Kansas City president Esther George, who dissented against unprecedented stimulus in seven policy meetings last year, voiced concern that the Fed may keep the main interest rate too low for too long.
“I fear we may wait too long to move rates,” George said in response to a reporter’s question after a speech Thursday in Madison, Wis. She doesn’t vote on policy this year.
The Federal Open Market Committee said in a Dec. 18 statement that it probably would hold the target interest rate near zero “well past the time that the unemployment rate declines below 6.5 percent.” Policymakers also decided to cut the Fed’s $85 billion in monthly bond purchases by $10 billion.
Though endorsing the statement, George said Thursday she was uncomfortable with the interest rate pledge.
“I’m very cautious about this idea of making future statements, which we refer to as forward guidance, because I think we do have to see how the economy unfolds, and we cannot wait too long to make decisions.”
Fed chairman Ben Bernanke led the Federal Open Market Committee last year in monthly bond buying of $85 billion. George voted against the purchases in the first seven committee meetings of the year before December.
George said she backed the Dec. 18 statement “in the context of beginning to” trim bond buying. In her speech before the Wisconsin Bankers Association she said she remained concerned the Fed’s policies were too stimulative.
“Monetary policy is likely to remain highly accommodative for some time with additional (albeit reduced) asset purchases under the current program and an extended period of low interest rates,” she said. “I remain concerned about the potential costs and consequences of these untested policies.”
Meanwhile, Janet Yellen, confirmed this week by the Senate to succeed Bernanke, said in an interview with Time magazine that the U.S. economy would accelerate this year, and more employment opportunities might follow.
“I think we’ll see stronger growth this year,” Yellen said. “Most of my colleagues on the Fed’s policymaking committee and I are hopeful that the first digit” of gross domestic product “could be 3 rather than 2.”
She added that “the recovery has been frustratingly slow, but we’re making progress in getting people back to work, and I anticipate that inflation will move back toward our longer-run goal of 2 percent.”