Rosengren Says QE Needed to Offset Fiscal Gridlock

In a speech presented 10/2, Boston FRB President Eric S. Rosengren, who is a voting member of the committee this year and among its super-doves, said there were three concerns that argued against tapering. First, the incoming data were “disappointing.” Second, Washington’s fiscal deadlock “might provide a further potential slowdown in economic activity.” Third, bond yields and mortgage rates had jumped to levels that threatened the ability of interest-sensitive sectors to support the economy’s recovery. None of this is new, but his speech confirms and neatly sums up what we knew already.

He also said, “Unfortunately, this [fiscal policy] remains an area of significant uncertainty, given debates in Congress on continuing resolutions and potentially allowing the country to default on its debt. The uncertainties, not to mention the outcomes themselves, threaten to have a collateral impact on the rest of the economy.”