Continuation of extremely accommodative monetary policies by the Federal Reserve could jeopardize economies of other countries, Kansas City Federal Reserve Bank President Esther George warned Friday.
"The FOMC continues to support current levels of monetary accommodation as desirable and necessary as long as the growth in GDP and employment is slow and inflation remains low," she said, according to prepared text of remarks released by the Fed. "Although the benefits of the current policy settings are presumed to outweigh potential costs, this tradeoff is not well understood. Accordingly, I remain concerned that continuation of these policies could have significant long-term costs."
The costs, she said, "may not be confined to just the countries with expansive policies. Such policies can influence other countries by distorting their exchange rates and balance of payment positions, capital flows and rates of credit expansion."
