TOKYO (MNI) – The U.S. economy is unlikely to undergo a double-dip
recession, but prices could remain sluggish for a number of years,
Donald Kohn, former vice chairman of the U.S. Federal Reserve, said in a
recent interview with the Nikkei published on Friday.
“There is concern that inflation could be much lower than many
members of the (Federal Open Market) Committee would like to see it for
several years now,” Kohn told the paper on Tuesday.
“They’re focused on the lower level of inflation,” he said.
“They’re focused on how rapidly it will rise back to where they want it
to be.”
Asked about the Fed’s purchase of Treasuries and other assets as
possible steps for additional monetary easing, Kohn suggested that
purchasing a small amount initially and then increasing it in line with
economic conditions would be effective.
“I think having smaller amounts (of asset purchases) but the
possibility of raising it could be constructive,” he said.
“If weak data come in so that people can judge that the forecast
might be revised lower, then the markets will anticipate more purchases
and they’ll put downward pressure on interest rates, anticipating those
purchases,” Kohn said.
Kohn retired from his post on Sept. 1 after working at the central
bank for 40 years, in which he served under three Fed chairmen: Paul
Volcker, Alan Greenspan and Ben Bernanke. Kohn is now a senior fellow at
the Brookings Institution.
tokyo@marketnews.com
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