(Adds comments, context)
By Jonathan Spicer
NEW YORK Dec 5 New York Fed President William
Dudley said on Monday there are benefits of having automatic
fiscal rules for the U.S. Congress even though he has long
resisted legislation that would impose similar policy rules on
the country's central bank.
Dudley, an influential Fed policymaker, was asked to defend
that position after a speech in which he waded deep into the
debate over what policies the Trump administration should pursue
A permanent voter on Fed policy and a close ally of Chair
Janet Yellen, Dudley called for automatic stabilizers in certain
situations, such as higher national unemployment compensation
when the jobless rate rises.
Addressing the nonprofit Association for a Better New York,
Dudley was asked by a member of the audience how he could push
for such rules while resisting efforts by some congressional
Republicans to tie the Fed's interest rate policy to a benchmark
President-elect Donald Trump, a Republican, could boost
efforts to constrain the Fed's policy discretion.
Yet the automatic government spending policies would only
come into play when the U.S. economy "really needs it, when you
are in an economic downturn," Dudley said, adding that doing so
would boost the confidence of investors and the public and make
them less prone to overreaction.
Whereas "monetary policy is very different," he said, since
experiences like the 2008 economic crisis show that
"mechanically" following benchmarks like the so-called Taylor
Rule "would be absolutely disastrous for the economy."
The Fed has long resisted the efforts to benchmark its
policy to a rule and for it to be "audited" if it strays,
arguing that it would open the central bank to short-term
Following a Taylor Rule, a favorite of Republican critics in
which rates are tied to levels of inflation and growth, would
have led to "much too tight monetary policy and as a consequence
you would have had a much weaker U.S. economy" in recent years,
He said it was important that the U.S. government have
"sufficient fiscal capacity" to support the economy in the next
(Reporting by Jonathan Spicer; Editing by Jeffrey Benkoe and