Expanded Federal Reserve efforts to boost tepid growth and cut high unemployment are justified as broken housing markets and depleted household wealth act as a brake on the recovery, a top Fed official said on Monday.
Even though the effect of aggressive Fed policies to ease financial conditions has been muted by declines in house values and consumer reticence, it would be wrong to conclude central bank actions are useless, Federal Reserve Governor Sarah Bloom Raskin said.
The opposite conclusion might well be the case -- namely that additional policy accommodation is warranted under present circumstances, she said in remarks prepared for delivery to an event sponsored by the University of Maryland Smith School of Business.
The Fed's aggressive actions have been completely appropriate in promoting job growth, Raskin said. Both fiscal and monetary policymakers should be considering a wide array of approaches for fostering job creation, she said.
Raskin's comments are the first statement on policy by a Fed official after a decision September 20-21 to launch a new tool aimed at jump-starting weak growth, and reflect the views of an activist wing of policymakers. The Fed announced $400 billion in long-term bond purchases matched with sales of the same amount of short-term securities in a bid to push down longer-term interest rates.
The Fed also announced it would resume buying mortgage-related debt in an effort to help depressed housing markets recover.
Raskin's support for Fed action stands in contrast to the three Fed officials who dissented against the decision to take further measures last week, all of whom are due to speak later this week.
(Reporting by Mark Felsenthal; Editing by Chizu Nomiyama)