HIGHLIGHTS-Recent remarks by Federal Reserve officials
Reuters
Sept 23 (Reuters) - The following are highlights from remarks delivered by Federal Reserve officials dating to the policy statement the central bank issued on Sept. 17. For more stories on Fed policy see:
SEPT. 23
KANSAS CITY FEDERAL RESERVE BANK PRESIDENT ESTHER GEORGE
(Not currently a voter on the Federal Open Market Committee)
George is "most anxious" to begin the normalization process, given the economy's growth and indications that low rates are encouraging investors to reach for year. Once the Fed does start raising rates, she said, it should do gradually and systematically.
"My objective is not to raise rates quickly - I do not want to derail this recovery," she said. "I think it is critical that we begin now to normalize those interest rates, to begin to allow the economy and the markets to allocate credit, to price risks the way they are intended to do."
MINNEAPOLIS FEDERAL RESERVE BANK PRESIDENT NARAYANA KOCHERLAKOTA
(Currently a voter on the FOMC)
Kocherlakota expected U.S. inflation to run below the central bank's 2 percent target through 2018, giving the Fed room to keep stimulating the economy.
ST. LOUIS FEDERAL RESERVE BANK PRESIDENT JAMES BULLARD
(Not currently a voter on the FOMC)
Bullard told reporters the U.S. central bank needs to change its forward guidance on interest rates to make it more data dependent.
Still, he felt it would have been premature to remove the Fed's reference to zero rates for a "considerable time" in September because the bank's bond-buying program had not ended.
"A more natural juncture would probably be the October meeting," Bullard said.
He still believed the Fed would need to raise rates from zero late in the first quarter of next year, adding he worried asset bubbles could form if policymakers move too slowly and mechanically in tightening monetary policy.
KANSAS CITY FEDERAL RESERVE BANK PRESIDENT ESTHER GEORGE
(Not currently a voter on the FOMC)
George did not comment on monetary policy or the economy in remarks at a Fed conference on community banking.
She said the Fed's effort to tighten financial regulation was placing a heavy burden on small banks and hurting customers.
"Community banks are not smaller version of the country's largest banks," George said.
FED GOVERNOR JEROME POWELL
(Permanent voter on the FOMC)
Like George, Powell did not touch on monetary policy in his welcoming remarks at the Fed's community banking conference.
He said rising competition from large lenders and regulatory pressure was hurting small banks.
"The burden of regulatory compliance can be particularly daunting for small banks," he said.
SEPT. 22
MINNEAPOLIS FED PRESIDENT NARAYANA KOCHERLAKOTA
(Currently has a vote on the FOMC)
Kocherlakota warned against raising rates while inflation is running below its 2 percent goal, saying doing so could undermine the Fed's credibility and unmoor inflation expectations.
"I think we need to be very cautious and careful about starting to raise rates because we do want to be sure that inflation is on the path back to 2 percent," he told the Economic Club of Marquette County in Michigan's Upper Peninsula.
Kocherlakota does not expect inflation to reach 2 percent until 2018.
The Fed should impose a two-year deadline on reaching the Fed's inflation target, he added, a change that would help bring unemployment down faster.
NEW YORK FEDERAL RESERVE BANK PRESIDENT WILLIAM DUDLEY
(Permanent voter on the Fed)
The Federal Reserve needs the U.S. economy "to run a little hot for at least some period of time" to push inflation back up to the Fed's 2 percent goal, Dudley said. He wants to see the unemployment rate fall further before removing policy accommodation.
"You have to make sure that, when you start to raise interest rates, the economy can take it," he said. "I can certainly imagine a scenario where the unemployment rate dips a little bit below what we view as sustainable. That would be the mechanism to actually push inflation back up."
Most Fed officials see sustainable long-run unemployment at somewhere between 5.2 percent and 5.5 percent.
He also said the steady rise in the dollar's value could complicate the Fed's job, potentially hurting U.S. economic performance and pushing down inflation.
"Inflation is quiescent for a very simple reason. We have excess slack in the economy," he said. "We are below the two-percent inflation target so that argues for more patience."
SEPT. 19
RICHMOND FEDERAL RESERVE BANK PRESIDENT JEFFREY LACKER
(Does not currently vote on the FOMC)
Lacker identified himself as the lone dissenter on the Fed's new exit strategy, renewing his opposition to the central bank's holdings of mortgage-backed securities.
"Specifically, I did not support plans for the assets on the Fed's balance sheet," Lacker said. "The Fed's MBS holdings may put downward pressure on mortgage rates, compared to holding an equivalent amount of Treasury securities, but if so, then other borrowers would likely face higher interest rates ... While this would favor home mortgage borrowers, it tilts the playing field against other borrowing by consumers."
DALLAS FEDERAL RESERVE BANK PRESIDENT RICHARD FISHER
(Currently has a vote on the FOMC)
Fisher, who with Charles Plosser of the Philadelphia Fed dissented on the Fed's decision, wants to raise rates gradually, but start sooner than market participants now anticipate.
"I personally would want to see, the date of our first move, I personally expect it to occur in the spring and not in the summer as it seems the markets are discounting," he said in an interview on Fox Business Network.
Speaking with Reuters later, he said he wants the rate increases to be in quarter-point increments, but "it depends on the economy." Fisher expressed worries inflation could rise, even though currently it is not a problem. He also was seeing financial excess in markets, particularly in high-yield bonds.
"I think we've levitated the markets," he said. "I don't want to drive this any further, and I think we have to be aware of this."
SEPT. 17
FOMC STATEMENT
"The committee continues to anticipate ... that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored." (Reporting by Reuters Fed reporting team; Editing by Andre Grenon and Richard Borsuk)
