11/16/2010 08:44 am ET Updated Dec 06, 2017

William Dudley, NY Fed President: It Could Take Years To End Fed's Easy Money Policies (VIDEO)

WASHINGTON - A top U.S. Federal Reserve official defended the Fed's controversial bond-buying program on Tuesday, saying it could be years before pulling back easy money policies is warranted.

"This exit could be years away," New York Federal Reserve President William Dudley said an interview on CNBC. A transcript of the interview was made public.

The dollar fell against the euro and the yen on the comments.

WATCH CNBC's interview with Dudley:

Dudley cautioned that it will take months of adding 200,000 to 300,000 jobs to foster a meaningful recovery, and said the Fed's program to buy $600 billion in longer-term Treasuries is unlikely to generate a spurt of growth.

"Modest effect. It's not a fantasy. It's not a magic wand," he said.

"It's going to make the economy grow a little bit faster. It's going to generate a little bit more employment growth. But you know, we have a long bumpy road to travel," Dudley said.

Criticism has rained down on the Fed internationally and domestically since it announced in early November it would buy $600 billion in longer-term Treasuries by the middle of next year to spur more robust growth. Among those taking issue are international trading partners of the United States who have said that the weaker dollar hurts growth elsewhere by weakening their exports.

Fed officials at the center of support for the policy were out in force to respond to disparagement of the policy that has heightened in recent days.

Fed Vice Chairwoman Janet Yellen, in another unusual on-the-record interview in the Wall Street Journal, said the easing program is not intended to push down the dollar, but to address unusually high unemployment and sluggish growth.

Dudley, a permanent voter on the Fed's policy setting panel, echoed Yellen's comments, saying the U.S. central bank's sole aim is to stimulate growth in the United States, not to devalue the currency at the expense of other economies around the world.

"What we're doing is actually in their long-term interests," he said. The sooner the United States recovers fully, the more quickly monetary policy authorities can pull back from extraordinary policies, he added.

"The goal of our policy is a very simple one, to ease financial conditions," Dudley said. "We're not trying to push the dollar to any particular level."

In addition to criticism from overseas, the Fed faces an unusually high degree of second-guessing at home.

Leaders of the Republican Party, which scored big gains in November elections on anti-government backlash, have slammed the Fed's easing program in recent days saying it undermines the dollar, sows the seeds of future inflation, and strays outside its mandate and into the domain of fiscal authorities.

On top of that, a number of Fed officials have questioned the policy.

"It's not surprising as the Fed gets to unusual, unconventional policy tools that there can be disagreement about whether the benefits outweigh the costs," Dudley said.

(Reporting by Mark Felsenthal; editing by Kazunori Takada)

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