Jan. 27 (Bloomberg) -- Former White House chief economist Christina Romer said the shortfall in employment and lack of additional fiscal stimulus justify action by the Federal Reserve to boost demand.
“The economy needs as much monetary help as possible given the deficiency in demand and the impediments to more short-run fiscal expansion,” Romer said today in a speech at an economics symposium at the Massachusetts Institute of Technology in Cambridge, Massachusetts.
The Fed yesterday strengthened its commitment to a $600 billion expansion of its balance sheet to “promote a stronger pace of economic recovery” even as critics have called for the plan to be reconsidered.
Critics including Stanford University Professor John Taylor have said the bond purchases risk sparking too much inflation. Republican politicians including House Speaker John Boehner, as well as Chinese, German and Brazilian government officials, have said the policy may undermine the dollar.
“The idea that we should be dialing it back, I actually think is very bad,” Romer said. “Given that output is dramatically below trend and inflation is below the Fed’s target level that strikes me as absurd.”
Romer served as the chair of President Barack Obama’s Council of Economic Advisors until September of 2010 when she returned to the University of California in Berkeley. She said that month that she “would be honored” to be considered to succeed Janet Yellen as president of the Federal Reserve Bank of San Francisco. Yellen became vice chairman of the Fed’s Washington-based Board of Governors, and her old job in San Francisco remains unfilled.
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