Fed’s Dudley Warns Fed Will Push Hard Against Threats to US Recovery

For now the Federal Reserve must push hard against threats to the U.S. recovery even though it still plans to reduce its support for the economy later this year, an influential central bank policymaker said on Monday.

In a strong defense of the Fed’s shock decision last week to keep buying bonds unabated, New York Fed President William Dudley warned in a speech that fiscal uncertainties “loom very large” as Congress prepares to hash out a deal to avoid a government shutdown and raise the nation’s debt ceiling.

At a separate New York event, Atlanta Fed President Dennis Lockhart likewise warned that America risked “losing its economic mojo” unless lawmakers worked to reverse declines in labor productivity and new job creation.

Last week, investors were stunned when the Fed decided not to reduce its asset purchases from the current $85-billion monthly pace, sparking a global stock rally. The decision prompted criticism that policymakers got cold feet despite improving employment and economic growth, and that they misled investors.

But Dudley, a close ally of Fed Chairman Ben Bernanke, highlighted drags from the sharp recent rise in longer-term interest rates, higher taxes and lower public spending adopted earlier this year, as well as growing questions over the debt limit and government funding.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza