Minneapolis Fed Ex-Chief Stern Doesn’t See Inflation DisasterJeanna Smialek
Gary Stern, former president of the Federal Reserve Bank of Minneapolis, said he doesn’t see an impending “inflationary disaster” as the central bank pumps money into the economy in an effort to stimulate growth.
“The benefits are not great, but the costs are not great,” Stern said in an interview on Bloomberg Radio’s “Hays Advantage” with Kathleen Hays. “It’s not a game changer.”
The minutes of the Federal Reserve’s last policy makers’ meeting, released today, showed that several members said the central bank should be ready to vary the pace of its $85 billion in monthly bond purchases.
“I think people are too negative when they say ‘well, look at all that’s been done, we’re heading for some type of inflationary disaster or some other kind of disaster,’” Stern said. “I don’t believe that’s correct. I think the jury is still out on that.”
Central bankers “do occasionally get it right” Stern said, and he is “not willing to bet the ranch” on the notion that Fed policy makers will “get it wrong” with their efforts.
When the Fed begins to taper off on its asset purchases will depend on the economy, he said.
“My own guess would be that there are going to be some surprises on the upside, some positive surprises,” Stern said, referring to gross domestic product, employment and consumer spending.
“I would say late this year, early next year, we will probably see more than talk,” Stern said. “We’ll see action along those lines.”
Stern was president of the Minneapolis Fed from March 1985 through August, 2009, the longest-serving president in the bank’s history, according to the bank’s website.