WASHINGTON — The Federal Reserve’s second-highest ranking official yesterday said the economy is not strong enough for the Fed to begin tightening credit, countering a vocal minority of members who argue the central bank’s stimulus programs are contributing to higher inflation.
Janet Yellen, the Fed’s vice chairwoman, said the bank’s $600 billion Treasury bond-purchase program and record-low interest rates are necessary to help lower unemployment, which was 8.8 percent last month. She is part of a majority of members, including chairman Ben Bernanke, who feel those programs are essential, even with oil and food prices surging.
A few members have raised concerns that the Fed’s programs could spur higher inflation. Richard Fisher, Dallas Fed president; Charles Plosser, president of the Philadelphia Fed; and Minneapolis Fed president Narayana Kocherlakota have suggested in recent weeks that it may be time to exit the programs. The Fed’s rate-setting committee meets next on April 26-27.
In remarks to economists in New York, Yellen argued that the surge in food and energy prices will have only a temporary and modest impact on consumer inflation. Businesses will be limited in raising retail prices because consumers are still spending cautiously, she said.