SAN ANTONIO/NEW YORK (Reuters) - The U.S. Federal Reserve should not move to ease monetary policy any further, despite dim prospects that unemployment will fall sharply any time soon, two top Fed officials said on Wednesday.
“As long as the U.S. economy continues to grow sufficiently fast to cut into the nation’s unused economic resources at a meaningful pace, I think benefits of further action are unlikely to exceed the costs,” William Dudley, the influential dovish head of the New York Federal Reserve, told reporters in New York.
Meanwhile in San Antonio, Dallas Fed President Richard Fisher -- a self-described inflation hawk -- reiterated his longstanding view that the best way to boost jobs is for Congress to provide more clarity on tax policy and government spending plans.
“My argument has been that we have done enough, in fact, we’ve done too much,” Fisher said of the Fed’s monetary policy easing. “I don’t see what we would accomplish with further accommodation.”
The Fed has kept U.S. short-term interest rates near zero since December 2008, and has said it plans to keep them there until late 2014. It has also bought $2.3 trillion in bonds over the past several years to further bring down borrowing costs and boost the economy.
After a pickup in economic growth and a sharp decline in the unemployment rate late last year, recent weakness in U.S. employment data and a simmering debt crisis in Europe have rekindled speculation that the Fed may step in to do still more.
Fed Chairman Ben Bernanke has kept the door open to further easing should the economic outlook worsen, a view echoed on Wednesday by Dudley.
“If the economy were to slow so that we were no longer making material progress toward full employment, the downside risks to growth were to increase sharply, or if deflation risks were to climb materially, then the benefits of further accommodation would increase in my estimation and this could tilt the balance toward additional easing,” Dudley told reporters.
Still, Dudley said, such a scenario is not his main forecast, telling reporters he expects a “gradual decline” in the unemployment rate “stretching out over next few years.”
The U.S. jobless rate stood at 8.1 percent in April, a month in which job growth slowed sharply, as it did in March. The May jobs report is due from the government on Friday.
Dudley and other Fed officials have warned that a series of scheduled tax rises and spending cuts at the end of this year could spell trouble for the slow economic recovery and the labor market.
On Wednesday, Dudley said that if no action is taken on this so-called fiscal cliff, it would be a “huge shock” to the economy and lead to a tightening of gross domestic product growth of some 3 percent.
Fisher for his part said that while he is more worried about job creation than inflation, more Fed easing would do little to help the economy.
“I don’t hear any business people and job creators saying, ‘I need more liquidity, I need more money,'” Fisher told reporters after a speech. Even though inflation is not currently a threat, “I don’t see what we would accomplish with further accommodation.”
Reporting by Corrie MacLaggan and Jonathan Spicer, writing by Ann Saphir; Editing by Chizu Nomiyama