Federal Reserve Bank of Boston President Eric Rosengren, who cast the lone dissent last month against a Fed decision to taper bond buying, said policy makers shouldn't rush to cut stimulus with inflation below 2 percent.
"With the inflation rate below target and the unemployment rate significantly above target, we believe strongly that monetary policy makers have the opportunity to be patient in removing accommodation," Rosengren said today on a panel discussion at the American Economic Association's annual meeting in Philadelphia. "This was one of the motivations for my dissenting vote."
Consumer prices rose 0.9 percent in November from a year earlier, according to an inflation measure watched by the Fed. The central bank aims for inflation of about 2 percent.
The Federal Open Market Committee in December decided to taper bond buying to $75 billion a month from $85 billion, citing an improvement in the outlook for the labor market. It was the first reduction in a program intended to boost growth and put Americans back to work after the worst recession since the 1930s.
Policy makers — scheduled to meet Jan. 28-29 — will probably reduce purchases in $10 billion increments over the next seven meetings before ending them in December, according to a Bloomberg News survey of economists after the FOMC announced its tapering on Dec. 18. The Fed through bond buying has expanded its balance sheet to $4.02 trillion.
"Even if we were not significantly undershooting our inflation target, there would still be a significant argument for monetary policy remaining highly accommodative," said Rosengren, who doesn't vote on policy this year.
