Fed officials take wait-and-see approach on stimulus

Reuters: Federal Reserve policymakers on Monday signaled little appetite for further monetary steps to stimulate U.S. growth in an economy that is gradually strengthening.

“With my current outlook, I think our policy stance is still the one best suited to foster steady gains in output and employment and to maintain stable prices,” Cleveland Fed President Sandra Pianalto told a business group.

A voter on the Fed’s policy-setting panel this year, Pianalto is viewed as a moderate aligned with a core group of policymakers, led by Chairman Ben Bernanke, who favor an activist approach to speeding up a sluggish recovery.

Dallas Fed President Richard Fisher said the economic recovery is gaining momentum and the central bank should not act hastily. A frequent critic of aggressive stimulus, he said in a television interview the Fed should watch and wait for more conclusive evidence that the recovery will endure before deciding its next move.

While Fisher saw no signs of “dramatic” inflationary pressures building, St. Louis Fed President Jame Bullard pointed to tight overall global capacity, which he said could be putting some upward pressure on U.S. inflation.

Their comments overall suggest there may be a high threshold for further Fed easing and that policymakers probably want to see a marked deterioration in the recovery before they would support firing another round of monetary stimulus. The Fed cut rates to near zero in December 2008 and has bought $2.3 trillion in bonds to boost growth. Recent news that hiring has been stronger than expected has led many analysts to project the Fed will have to raise interest rates earlier than the late 2014 date it has indicated.

But Fed Chairman Ben Bernanke said last week the relatively modest pace of U.S. growth is unlikely to lower the 8.3 percent unemployment rate quickly, and that further stimulative action would remain an option.