By Steven K. Beckner

NEW YORK (MNI) – Cleveland Federal Reserve Bank President Sandra
Pianalto said Thursday evening that the Fed has options if additional
monetary accommodation is needed, but she said the Fed needs to weigh the
costs and benefits of further action and make sure it can be effective.

Pianalto, a voting member of the Fed’s policymaking Federal Open
Market Committee, did not disclose whether she thinks more monetary
stimulus is needed, but was less than ebullient about the outlook.

She said there are “some signs” the economy is “mending” but said
economic growth is apt to be too slow to bring down unemployment in
remarks prepared for delivery to the Women’s Economic Round Table in New
York. She also said she expects inflation to remain below the Fed’s

Pianalto said the Fed has already “put in place a highly
accommodative monetary policy” and noted that on top of keeping the
federal funds rate near zero it has gone even further lately to prevent
its balance sheet from shrinking and causing an inadvertent tightening
of policy.

“More recently, to ensure that we are not passively removing our
policy accommodation, the Federal Reserve decided to reinvest principal
payments from our agency debt and MBS securities into longer term
Treasury securities,” she said.

“If further policy accommodation is needed to promote price
stability and the continuation of the economic recovery, we have options
available to us,” Pianalto said.

However, she said “We are in uncharted waters. History does not
provide a complete guide for the unconventional policy tools we are
using, which is why it is important that we continue to examine the
costs and benefits of these tools.”

“If additional accommodation is needed, I want to be sure that the
framework we employ is an effective one,” she continued. “I am confident
that the Federal Reserve can effectively respond to evolving economic
and financial developments.”

Pianalto prefaced her remarks on policy by saying that the economic
recovery is proving “gradual and bumpy” as she expected. She said “a lot
of people are hurting, but there has been some movement in a positive
direction.” And she said many businesses are “struggling.”

“There are some signs that the economy is beginning to mend,” she
said. “The private sector is adding jobs, and we have positive GDP

But “while the economy is growing, and I expect that it will
continue to grow next year, the current pace of growth is not fast
enough to make much progress in lowering the unemployment rate,”
Pianalto said.

“I also expect underlying inflation to remain near its current low
level through next year, lower than the roughly 2% rate that I see as
consistent, over the long run, with the Federal Reserve’s objectives,”
she went on.

“As a Federal Reserve policymaker, I am focused on achieving our
long-term policy objectives of price stability and maximum employment,”
she added.

** Market News International Washington Bureau: 202-371-2121 **

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