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Stanford’s Taylor Says Fed May Not Complete $600 Billion Plan

Stanford Professor John B. Taylor
John B. Taylor, professor of economics at Stanford University. Photographer: Bradley C. Bower/Bloomberg

The Federal Reserve may not complete the full $600 billion of securities purchases it announced last week to stimulate the economy, said Stanford University economist John B. Taylor.

“It’s a real possibility” the central bank will stop before completing the purchases it plans to make through June, Taylor said in an interview today on Bloomberg Television’s “InBusiness with Margaret Brennan.”

“I hope so. They left themselves some wiggle room,” he said. Though the policy is aimed at lowering unemployment, Taylor said “I don’t see it having that effect. To me it raises a lot of risks. I don’t think it’s a stimulus.”

Taylor said that skeptics within the central bank may gain traction with their arguments, such as Fed Governor Kevin Warsh, who said Nov. 8 that he is “less optimistic than some that additional asset purchases will have significant, durable benefits for the real economy.”

The Federal Open Market Committee, in its Nov. 3 statement, said policy makers “will adjust the program as needed.” Taylor said that the most likely outcome is that the Fed will complete the purchases.

Taylor, 63, is the creator of the eponymous Taylor Rule, used to determine the appropriate level for interest rates. He was an undersecretary of the Treasury during the presidency of George W. Bush.

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