Blinder Says Fed May Be Reluctant to Ease Further in Near Term

Alan Blinder
Alan Blinder, former vice chairman of the U.S. Federal Reserve, speaks at the Hamilton Project economic forum in Washington, D.C. Photographer: Brendan Hoffman/Bloomberg

Aug. 27 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke may be reluctant to ease monetary policy further with unconventional steps in the near term, former Fed Vice Chairman Alan Blinder said.

Bernanke’s speech today on policy alternatives stressed “if necessary,” Blinder, a Princeton University economist, said in an interview on Bloomberg Radio’s “The Hays Advantage,” with Kathleen Hays. “He is not on the verge of doing anything. I thought he was relatively pessimistic about the efficacy of the actions.”

Bernanke said the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery and said more securities purchases may be warranted if growth slows.

“If it were just Ben Bernanke acting on his own, some further action might be closer,” Blinder said. “He has some significant resistance from within the FOMC.”

Lowering the interest rate on banks’ deposits at the Fed to below zero may be the “best option” to support growth, Blinder said. Still, “the heavy artillery has already been fired,” he said.

The Fed two weeks ago decided to keep its bond holdings at $2.05 trillion by reinvesting the proceeds from maturing mortgage-backed securities into Treasuries. The Federal Open Market Committee, seeking to spur economic growth, held the main interest rate at zero to 0.25 percent, where it’s been since December 2008, and affirmed a pledge to keep rates low for “an extended period.”

Blinder said he continues to back additional federal spending by Congress to support the recovery, especially directed at jobs programs.

To contact the reporters on this story: Steve Matthews in Atlanta at; Kathleen Hays in New York

To contact the editor responsible for this story: Christopher Wellisz in Washington at