Federal Reserve's Dudley Hints at Further Action to Ease Money Supply

Federal Reserve's William Dudley
Federal Reserve's William Dudley

Federal Reserve Bank of New York President William Dudley said further monetary action by the Fed may be warranted because of high unemployment rates and low inflation, Bloomberg News reported, citing a speech Dudley made Friday at the Society of American Business Editors and Writers conference in New York.

Dudley said that if the Fed acquired more mortgage debt or Treasuries, it would help boost home and stock values by making home loans cheaper and enabling business to borrow money at lower rates, the wire service reported.

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While Dudley discounted the chance of the U.S. falling back into a recession, he said he was concerned about the amount of time the economy will take to return to full employment and price stability. He estimated that $500 billion of mortgage-debt or Treasury purchases would have an equivalent effect on the economy to cutting the Federal Reserve benchmark interest rate by .5% to .75%, according to Bloomberg.

The yield on the 10-year Treasury note actually rose last month to 2.53% from 2.47%, though it has fallen from its 3.85% rate at the end of last year.