Despite possible costs and risks, monetary policy needs to remain very accommodative, as restrictive fiscal policy holds back the recovery, Federal Reserve Bank of New York President and Chief Executive Officer William C. Dudley said Monday.

"The FOMC is committed to the dual objectives of maximum sustainable employment in the context of price stability. Currently we are falling well short of our employment objective and the restrictive stance of federal fiscal policy is a factor. On inflation, we are also falling short, but by a considerably smaller margin," he told the Economic Club of New York, according to prepared text released by the Fed. "As a consequence, we need to keep monetary policy very accommodative."

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