Further easing of monetary policy by the Federal Reserve would hinder U.S. job growth because it would push prices higher and ultimately hurt demand, said John Ryding, chief economist at RDQ Economics LLC in New York.
“More easing would create more inflation, which would hurt the consumer even further, and it would be counterproductive to stimulating economic growth,” Ryding said in a radio interview today with Tom Keene on “Bloomberg Surveillance.”
Fed Chairman Ben S. Bernanke signaled this week that the central bank will maintain its record monetary stimulus, even after ending large-scale bond purchases in June. At his first press conference following a policy meeting, Bernanke attributed a surge in commodity and energy prices to rising demand in developing nations and turmoil in the Middle East.
The Fed already has gone “way further than any central bank probably should do with a price-stability mandate as well as an unemployment mandate,” Ryding said. “The Fed cannot create jobs,” and “it is not tight money that is holding back job creation.”
Paul Krugman, a professor at Princeton University, is among economists who say the Fed should do more to push down the unemployment rate, which stood at 8.8 percent as of March. Policy makers have left the benchmark interest rate in a range of zero to 0.25 percent since December 2008.
“To advocate more easing to lower unemployment, I just think, is the wrong medicine,” Ryding said. “We need to lower tax rates if we want to boost employment.”
The Federal Open Market Committee, in its statement this week, said it expects the increase in inflation to be “transitory” and that measures of underlying inflation “continue to be somewhat low.”
A measure of inflation tied to spending patterns rose 1.8 percent from a year earlier in March, following a 1.6 percent increase in February, Commerce Department figures showed today. The Fed’s preferred price measure, the so-called core inflation reading that excludes food and fuel, rose 0.9 percent in March from a year earlier, matching the 12-month gain in February.
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