Fed debate about more easing heats up

Two top Federal Reserve officials are arguing the U.S. central bank should consider resuming controversial large-scale mortgage bond purchases to support a fragile economic recovery. In his first speech explicitly on the economic outlook since joining the Fed in 2009, Fed Governor Tarullo on Thursday said there was "ample room" for policymakers to do more. Tarullo said mortgage bond purchases should be on the table, a sentiment echoed by Boston Fed President Eric Rosengren in an interview with the Wall Street Journal on Wednesday. Tarullo and Rosengren's comments mark the first public discussion of the possibility of more mortgage bond purchases, which were a controversial part of the first round of quantitative easing in 2009. Other Fed officials said on Thursday the Fed's current policy stance is appropriate. For his part, St. Louis Fed President James Bullard told reporters that with recent economic data looking better, "monetary policy is appropriately calibrated for this situation." Cleveland Fed President Sandra Pianalto also said Fed policy actions were "appropriate." Because the ongoing housing problems are so central to the recession and the anemic nature of the subsequent expansion, the Fed should refocus its efforts on housing, Tarullo said. "I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities," he added. Another Fed official, Minneapolis Fed President Narayana Kocherlakota said unemployment, which he described as "disturbingly high" now, would have been higher without the actions the Fed has taken.

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