NY Fed President: More Economic Aid Likely

10/01/2010 11:32 am ET | Updated May 25, 2011

A top Federal Reserve official says the Fed is likely to take additional action to boost the economy and lower unemployment, the AP reports:

"William Dudley, president of the Federal Reserve Bank of New York, says the pace of the economic recovery has been disappointing. He worries that if the economy doesn't show stronger growth, the risk of a deflation outbreak rises. That's a dangerous and widespread decline in goods and services, wages and in the values of homes and stocks.

The Fed is considering buying more government debt to force down rates on mortgages and other loans to entice Americans to spend more. Doing so would bolster the economy."

Bloomberg has more context on Dudley's comments:

"Dudley's remarks are one of the clearest signs that policy makers will start a second round of unconventional monetary easing as soon as the [Fed Open Market Committee]'s next meeting Nov. 2-3. While other Fed officials voiced a range of views in speeches this week, Chairman Ben S. Bernanke said yesterday that the central bank has a duty to aid the U.S. economy as the jobless rate holds near 10 percent.

Lowering long-term interest rates by restarting purchases of Treasuries or mortgage debt would have a "significant" effect on the economy by supporting the value of homes and stocks, making housing and refinancing mortgages more affordable and reducing the cost of capital for businesses, Dudley, 57, said to a Society of American Business Editors and Writers conference. "

Dudley also added that he sees the U.S. economy "gradually" accelerating in the coming months and predicts it won't fall into a double-dip recession. His worry, however, is how quickly the economy will achieve "full employment" and price stability.

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