Two Fed Presidents Leaning Toward Even More QE

Minneapolis FRB President Narayana Kocherlakota, who is a non-voting member of the FOMC this year and a voter next year, said in a 9/26 speech that the committee must “do whatever we can to facilitate a faster rate of improvement in labor market conditions.” He implied that more rather than less QE might be needed. If employment weakens over the next few months, then instead of tapering QE, the FOMC might vote to buy securities at a faster monthly pace, as suggested by Kocherlakota.

New York FRB President Bill Dudley would certainly vote to do so in this scenario. In a 9/23 speech, he said: “To begin to taper, I have two tests that must be passed: (1) evidence that the labor market has shown improvement, and (2) information about the economy’s forward momentum that makes me confident that labor market improvement will continue in the future. So far, I think we have made progress with respect to these metrics, but have not yet achieved success.”