By Steven K. Beckner
SAN FRANCISCO (MNI) – San Francisco Federal Reserve Bank President
John Williams indicated Tuesday that if the Fed decides to do further
large-scale asset purchases or “quantitative easing” that he would favor
announcing the amount of purchases on a meeting-by-meeting basis, rather
than a large lump sum up front as was done in QE1 and QE2.
Williams, talking to reporters at a San Francisco Fed conference,
also said that it would be “potentially useful” for the Fed to announce
its expected path for interest rates as some Scandinavian central banks
Williams, who will be a voting member of the Fed’s policymaking
Federal Open Market Committee in 2012, did not say whether or not he
thinks a QE3 will be needed. He said he still expects the economy to
continue growing moderately despite the worsening of the European debt
crisis, but said “there are pretty large downside risks to the outlook.”
Whether more monetary stimulus is needed — either in the form of
Q.E. or in the form of enhanced forward guidance on the federal funds
rate — will depend on how the outlook evolves.
Williams described himself as “sympathetic” to the views of St.
Louis Fed President James Bullard, who has opposed pre-announcing large
amounts of asset purchases with a fixed end date and has instead
advocated deciding on the amount of purchases at each FOMC meeting and
leaving the purchases more adjustable and open-ended.
“Asset purchases … we have done in these big lumps,” Williams
said. “The way I guess I prefer to think about it is where do we need
financial conditions to be” and “how, given how much additional
stimulus you may need what’s appropriate amount of additional asset
purchases to make.”
The FOMC has “tended in the past to give announcements” of asset
purchases” and then “nothing until that’s done.”
Williams said that leads to “a lot of anticipation of what we
“It would be beneficial to have an asset purchase program, if we
were to do one, that had more consistency over time” and that would
“allow us to adjust as the outlook changes … as opposed to announcing
“I’m very sympathetic to the point he’s making,” he said of
Bullard, who recently told MNI, “you should go one meeting at a time,
make a commitment to some purchases at that time and then you have a
continuation value, which is some guidance about where you think the
economy is going and where policy is likely to go in the future.”
One of the ideas to improve communication which Williams said he
has been “thinking about” is to announce an anticipated interest rate
path for “the next few years.” He said that would be “potentially
useful.” He emphasized that this would have to be conditional, “not a
On China, Williams said consumer spending needs to be a bigger
piece of that country’s GDP.
On Europe, he said he is watching the situation closely and hopes
to avoid a worsened crisis.
** Market News International **