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.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.