The Federal Reserve would be able to lower borrowing costs further if the economy weakens considerably by reinvesting maturing mortgage debt it owns or boosting asset purchases, Boston Fed President Eric Rosengren said.
In an interview with the Wall Street Journal published on Tuesday, Rosengren said the Fed had not run out of ammunition just because official interest rates are now at zero.
There are several policy options if we think the economy is weaker than we would like, he was quoted as saying.
Rosengren, generally considered one of the more dovish members of the U.S. central bank, added that he was nervous about the threat of falling prices.
The risk of deflation has gone up and is more of a risk than I would like to see at this point, he said.