Boston Fed President Eric Rosengren on wanting QE3!

We're joined now by Boston Federal Reserve chief chief Eric -- grand. Eric welcome to the show RE doing today. I'm very I'm doing fine thank you. Good thanks for joining -- take. Eric can you explain to us what your position is on and no -- another round of quantitative easing please. Let me start by talk a little bit about it -- because we're doing the poll the relatives that ours being the economy right now. We had employment report last Friday. And there was a good numbers that the payroll employment grew by a record 68000. But it comes after three consecutive month of less than a 100000 jobs being created. And the unemployment rate was eight point 3% -- payment that was the beginning of the year. If you look at other labor market that says that we've been basically treading water. Similarly if you look at what's been happening for GDP the first quarter was only 2%. Second quarter was one. Again we're doing better than much of the rest of the world we were still only treading water. But the reason -- advocating for stronger monetary policy this because it's very closely for the on the to only be treading water -- editors of time. What with this monetary policy be -- how would it stimulate the economy air. So the monetary policy would be another. Purchase program. Hopefully it would be focused on mortgage backed securities. It would serve and number. It would -- on me through a number of different. One would be that it would push down mortgage rate. Pushing down mortgage rates made housing more affordable make it easier for people to make a decision that GM paying rent my Condo maybe it. Time -- -- actually purchased a Condo or buy a home. It would help the stock market this time that we've announced quantitative easing programs. The prices of on up the stock market has gone up that -- economy grew higher well. And it would help exporters because are the dollar would probably not appreciated rapidly. If we went through with quantitative easing. Witty just keep mortgage rates where they are -- would they get the mortgage rates even lower I think the thirty year mortgage rate now is under 4%. So mortgages are low by historical standards part of the goal is to get it low enough. That people that are on the spent deciding between whether they should continue to read over route they should make that choice now and actually do urges. We'll get off the -- they not only are prices relatively low relative to where they've been historically. But also that this may be an unusual opportunity to -- -- to either thirty years fifteen years the product that is. Very low relative to historical standards the part of the bullet to get the housing market expect we have been picked up. In Boston provoke on those -- we're still we're seeing prices are starting to improve. The market like Boston. Somewhat more robust market. Are starting to show signs that. They are picking up a lot of -- Sustaining recovery. We want economic wrote that the faster we want a stronger labor market. -- it's actually a good time to try to provide that actually. A little bit more room to make sure that we don't continue to be treading water. But airport about the savers what about the people that wanna go to their bank and by a five year CD and make 5% interest on it -- mean -- five year CD now. Especially with quantitative easing has led interest rates on CDs to be at record lows. So the worst outcome would be that they were Rio are with great low end no prospect that changes and the purpose of albeit they get it on. Economy growing more strongly. That we can normalize interest rates. Right now we've been treading water is the beginning of the year. It looked like physical problem that we're basing your not gonna be addressed until after the election. It looks like the European problems are only going to be slowly resolved. We can't just be waiting to these things that happened we need to know sustaining recovery United States. Why would take action now. Because I agree with you the last and we want -- receivers to be continually getting. Very low return the way to do that is to normalize it things. Eric some economists feel that quantitative easing is artificial and that there's a consequence to be paid for what is that consequence in and what are we gonna pay it. I mean when you when the Fed's steps in to. And reduces interest rates through quantitative easing you worry about the snapped back -- The Who you know what's the consequence of that action. Well the main concern that people have a lot of it is the thing is that might result too much elation. So we had to quantitative easing program. And our balance sheet stirred to expand -- -- all 2008. Many people were very worried about inflation at that time. If you look at the personal consumption expenditure measure of inflation which is what that focuses on. We're currently for the last twelve months. Wage rate of one percent. So despite the fact that -- balance -- -- expanded. We've not gotten inflationary impact that many people were concerned about and in fact we're below the 2% target that we developers though. So not only are we missing in terms of the unemployment rate to we're missing that inflation rate is lower target that's exactly the reason to take action now. Do you feel that this next round of quantitative -- easing would have. A positive effect on unemployment meaning get it below eight point 3% may be into the sixes. So no matter what we did we're not gonna get -- -- quickly but I think that. We haven't gotten any progress. Rate. Right where we were at the beginning of the year. We need to change that we need faster we're opening -- and we need the unemployment rate to be trending down this policies -- to generate oh. All right Y architecture appreciate your time and they're busy man thanks for joining us. That's Eric -- grand if you don't know who he is folksy he's been around Boston along time -- from this area I think he's from the share an area and he was it one of the reasons we did have a meltdown. Of the New England bank student was before he became the Fed president for the Boston chapter. He was in charge of compliance that he would go around -- local savings banks and tell them hey you're making too aggressive. Loans OK and and real men. You may disagree with his policy in many people do but I'll tell you he was a very good. Compliance person for Boston we got hit very badly if you recall in 891991. We have a lot of foreclosures he had to clean up that mess. Now he learned from that and New England banks in general. -- very well relative to the rest of the country during the banking crisis because it was watched over so by -- closely at the end and I credit him for that again. Not saying I agree with another round of quantitative easing. But I do agree with the way he's done his job over the last twenty years. Our it will be right back when we come back we're going to be joined by Elizabeth -- from Kipling or we've got mutual -- that's right mutual fund talk is up next on the financial exchange.