–Says Doesn’t Know If FOMC Will Back Further Quantitative Easing
–Double-Dip Recession ‘Quite Unlikely’

By Claudia Hirsch

NEW YORK (MNI) – New York Federal Reserve Bank President William
Dudley Friday said he doesn’t know yet where he’ll fall on the question
of a second round of monetary accommodation to juice the slowly growing
economy when U.S. monetary policy makers meet in November.

Answering audience questions following a speech at a conference
hosted by the Society of American Business Editors and Writers, Dudley
said he won’t “prejudge what I’ll be advocating at that meeting.” He
also said he doesn’t presume to know where the monetary policy-setting
Federal Open Market Committee as a whole will stand on the matter. He
had been asked for an estimated total of any next injection of so-called
quantitative easing, as well as how the Fed might announce such a
decision.

In his prepared remarks, however, Dudley had said additional
monetary stimulus is “likely” warranted.

“I conclude that further action is likely to be warranted unless
the economic outlook evolves in a way that makes me more confident that
we will see better outcomes for both employment and inflation before too
long,” he said in his speech.

Later, answering audience questions, Dudley said, “The best thing
to do is go to the November FOMC meeting and have a good, heartfelt
discussion.”

When the time comes to reverse the massive bulk of quantitative
easing, he said, making timely moves that do not spark inflation are “as
important” as the Fed achieving its two imperatives to nurture
employment and price stability.

“If we can’t exit smoothly when the time comes, then we can’t
achieve our dual mandate,” he said, adding that the Fed has the tools to
be “effective in allowing us to exit without a long-term inflation
problem.”

He also mentioned that the Fed’s inability to attain their two top
goals now is “frustrating.”

Nonetheless, Dudley said he’s “pretty optimistic … that the
economy is going to keep growing. We’re on track for 2% growth,” and
that figure should climb from there. He questioned the notion that the
economy will fall back into recession.

“I think the so-called double dip that people talk about is quite
unlikely,” he said, noting “quite stimulative” policy, housing and auto
industries that are already operating at “depressed” levels and an
expanding global economy.

Asked where the unemployment rate might ultimately settle, Dudley
said, “I don’t think we know,” but added, “clearly the long-term
unemployment rate is way below the 9.6% rate that we’re at today.” He
said the economy must “start heading toward that more forcefully.”

On other matters, Dudley said banks are no longer tightening
borrowing conditions.

“Some banks are actually starting to ease availability.”

Turning to the troubled commercial real estate market, where many
properties are worth less than their corresponding loan values, Dudley
said that eventual loan restructuring in coming years will likely put
pressure on banks.

“I don’t think it’s going to be a huge restraint on the recovery,
but it is going to be something that slows banks.”

** Market News International New York Bureau, phone 212-669-6430 **

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