Fed's Powell-Policy to Be Highly Accommodative for Quite a While

Reuters
Federal Reserve Board of Governors member Jerome Powell listens during an open board meeting at the Federal Reserve in Washington
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Federal Reserve Board of Governors member Jerome Powell listens during an open board meeting at the Federal Reserve in Washington in this December 14, 2012 file photo. REUTERS/Kevin Lamarque/Files

WASHINGTON (Reuters) - The U.S. Federal Reserve will maintain its ultra-easy monetary policy for quite a while longer, regardless of what decision it takes on when to change the level of its monthly bond buying campaign, a senior U.S. central banker said on Friday.

"What matters is the overall stance of policy, not the pace of asset purchases," said Fed Governor Jerome Powell.

"In all likelihood, policy will remain highly accommodative for quite a while longer - as long as needed to support an economy that still struggles to shake off the lingering effects of the financial crisis," he said in remarks prepared for delivery to the Institute of International Finance.

He said that the decision to stand pat had been a "close call" for him, echoing remarks by other members of the 19-member Federal Open Market Committee, adding that he would have been comfortable with a small reduction in purchases.

"However...there were legitimate concerns about the strength of incoming economic data, the economic effects of tighter financial conditions and of tighter fiscal policy, and the prospect for disruptive events on the fiscal front," he said.

That caution provoked intense criticism of the Fed for a communication stumble, after failing to correct a hard impression in markets that it was going to start scaling back bond buying in September from an $85 billion monthly pace.

Powell said that in fact, the Fed had been vindicated by the subsequent uncertainty created by budget gridlock in Washington.

"Events since the September meeting suggest that the concerns regarding fiscal matters were well founded," he said.

(Reporting by Alister Bull; Editing by Chizu Nomiyama)

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