Boston Fed President Eric Rosengren argued for the Fedís recent decision to implement QE3. He stated that the FOMCís recent actions are needed to prevent what calls otherwise would be ďThe Great StagnationĒ in which economic growth is sluggish and unemployment is high.
Rosengren indicated that headwinds to U.S. growth are coming from overseas and need to be offset.
"Unfortunately, the global economy is experiencing a slowdown, and that slowdown is one of the significant impediments to faster growth in the domestic economy."
The Boston Fed president re-affirmed that currently the key issue among the majority of FOMC members is to improve the labor markets.
"...given the desire to increase policy accommodation even while the traditional policy instrument (the federal funds rate) is at the zero lower bound, the FOMC announced plans to buy $40 billion worth of mortgage-backed securities a month - until such time as there is substantial ongoing improvement in labor markets. The more open-ended nature of the action - intending to continue such purchases until labor markets have improved - is an important change. Of course, the Fed will do so in the context of price stability (which is the other half of the Fedís "dual mandate," along with maximum sustainable employment) - and hand in hand with a careful ongoing assessment of the programís costs and efficacy."
Rosengren indicated that part of the Fed's strategy is to flatten the yield curve and to make mortgage rates extremely attractive so as to help boost the housing market.