–Fed has “the Tools and The Will” to Offset Inflation

By Sheila Mullan

NEW YORK (MNI) – New York Federal Reserve President William Dudley
Friday said he is not worried about the threat of rising inflation
fueled by the Fed’s large scale asset purchases.

His comments came following prepared remarks at a breakfast hosted
by the Queens Economic Development Council and Queens Chamber of
Commerce.

Asked if the Fed quantitative easing program is flooding the U.S.
economy with dollars that could drive up inflation, Dudley responded, “I
don’t think you have anything to worry about.”

Dudley reminded that when first the asset buys were first
announced, the Fed “could not push short-term rates any lower” and thus
had to find an alternate route to stimulate the economy.

“I do not think you have anything to worry about,” said Dudley. “We
can control how these reserves lead to credit expansion.

“It really is nothing to be worried about,” Dudley reiterated. “The
world has changed: we have new tools.”

He added, “Not only do we have new tools, we have the will” to use
them.

Generally speaking, Dudley said the Fed has done everything in its
power to support the economy, adding that “we are pretty close to
getting a virtuous circle going.”

He demurred when asked if the value of the dollar was declining,
saying that was the purview of the U.S. Treasury Department.

Dudley noted that bank lending to businesses is “considerably
better” than it was at the height of the crisis, indicating a “thaw” in
the credit crunch.

And while lending conditions are starting to ease, he cautioned
banks not to “overdo it” as they reverse tight lending standards.

Dudley got the most reaction — groans actually — when he
responded to a questions about higher orange juice prices as an example
of higher inflation by telling audience to look at the total universe of
goods, including say iPads.

“Today you can buy an iPad Two for the same cost as an iPad One,”
Dudley said.

–email: smullan@marketnews.com, 212-669-6432

** Market News International New York Newsroom: 212-669-6430 **

[TOPICS: M$U$$$,MMUFE$,MGU$$$,MFU$$$]