Fed Officials Split on Easing

http://www.bloomberg.com/news/2012-01-12/fed-officials-split-over-easing-as-they-prepare-interest-rate-forecasts.html

Federal Reserve officials disagreed on the need for more easing amid signs of improvement in the economy that may shape the interest-rate forecasts they will reveal for the first time this month.

Chicago Fed President Charles Evans in a speech yesterday said economic growth is modest and called for “substantial” accommodation. During the past week, New York Fed President William Dudley, Boston’s Eric Rosengren and San Francisco’s John Williams have also backed consideration of a third round of bond buying.

Philadelphia Fed President Charles Plosser said yesterday that policy makers should watch “very carefully” for the risks of accelerating inflation, and Kansas City’s Esther George said Jan. 10 that too much accommodation can raise the odds of financial instability. Richmond’s Jeffrey Lacker said he is “nervous” about the Fed’s independence because of its forays into fiscal policy.

At its next policy meeting, Fed officials will also provide their forecasts for unemployment, growth and inflation for the first time since November.

The Chicago Fed’s Evans said he supported more Fed action because his forecast for inflation is at the “lower end” of his colleagues’ expectations.

Of the new voting members, Williams said Jan. 10 that he sees a “strong” case for new purchases of mortgage bonds given his expectation that inflation will fall below 1.5 percent this year.