Fed's Rosengren Explains Dissenting Vote

(RTTNews) - Eric Rosengren, the president of the Boston Federal Reserve Bank and lone dissenting vote at this month's rate-setting meeting, wanted to see more evidence that the economy is on the mend before scaling back stimulus.

The Fed voted Wednesday to buy $75 billion a month in Treasurys and mortgage-related assets, down from $85 billion.

In a statement posted on his bank's home page, Rosengren argues that the decision to taper the Fed's massive bond-buying plan was "premature" in light of the fragile nature of the recovery.

The Fed vote was held two day before the government figures showed an unexpected upward revision to the pace of U.S. economic growth in the third quarter of 2013.

The Commerce Department said gross domestic product increased by an upwardly revised 4.1 percent in the third quarter.

Rosengren acknowledged that the economy will continue to grow in 2014, but made no mention of today's encouraging GDP data.

"I, too, expect the economy to continue to improve, and my forecast is for real GDP to grow at a rate close to 3 percent next year," he said. "Like the (FOMC), my assessment has brightened in recent months. But, by the same token, I do not yet have sufficient confidence in this outlook to risk the removal of any monetary accommodation at this time."

In accordance with its dual mandate, the central bank should also do what it can to promote price stability, Rosengren argues. Annual inflation remains subdued at 0.7 percent, well below the Fed's 2 percent benchmark for healthy inflation.