Reuters: Politics: Beyond economy, asset buys also have fiscal benefits: Rosengren

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Beyond economy, asset buys also have fiscal benefits: Rosengren Feb 22nd 2013, 15:17 Tweet Share this Email Print Related News Fed's Bullard-Policy to stay easy despite exit chatter 10:05am EST Global shares, euro tumble on economic concerns, Italy vote Thu, Feb 21 2013 Markets on edge as Fed officials differ on bond-buying Thu, Feb 21 2013 WRAPUP 3-Markets on edge as Fed officials differ on bond-buying Thu, Feb 21 2013 Jobs, factory, inflation data favor easy Fed policy Thu, Feb 21 2013 Analysis & Opinion Soaring kiwi dollar tests faith in inflation goal Fed stimulus benefits still outweigh risks, Lockhart tells Reuters Boston Fed President Eric Rosengren speaks during the Sasin Bangkok Forum July 9, 2012. Credit: Reuters/Sukree Sukplang NEW YORK | Fri Feb 22, 2013 10:17am EST NEW YORK (Reuters) - The Federal Reserve's massive asset purchases work to help not only the U.S. economy, but also the broader fiscal situation, a top Fed official said on Friday. In a speech, Boston Fed President Eric Rosengren redoubled his defense of the U.S. central bank's policy of buying $85 billion in bonds per month, and he extended the argument to outline benefits to the government from the program. The so-called quantitative easing program, known as QE3 because it's the third such effort by the central bank, reduces interest rates for the United States, and helps to lower the country's debt-to-GDP ratio, said Rosengren, a dovish Fed official who has a vote on the Fed's policy committee this year. Further, he argued, the faster economic growth brought about by QE3 has the effect of bringing in more tax revenue. It also reduces government spending in areas such as unemployment insurance because such programs reduce joblessness, he said. "We do well to also consider these benefits, and the costs of inaction, when evaluating policy," Rosengren said at a conference hosted by the University of Chicago Booth School of Business, according to prepared remarks. The Fed is buying $45 billion in Treasury bonds and $40 billion in mortgage-backed securities per month in an effort to encourage spending and investment, and to help along the slow and erratic U.S. recovery from the 2007-2009 recession. Though the buying is meant continue until there is a substantial improvement in the outlook of the labor market, some Fed policymakers are growing concerned that the central bank's balance sheet, now at $3 trillion, risks destabilizing financial markets or future inflation. In a familiar argument, Rosengren also said that U.S. unemployment would be higher than the current 7.9 percent rate, and inflation would be even weaker than it is, absent the purchases. (Reporting by Jonathan Spicer; Editing by Chizu Nomiyama) Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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