WASHINGTON — Divisions within the Federal Reserve over how to pump up the economy and lower unemployment came into sharper view Wednesday.
Three Fed officials squared off in competing speeches over how much help would come from one likely next step — buying more government debt.
Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said such an effort may not help the economy much. Charles Plosser, president of the Federal Reserve Bank of Philadelphia, made a similar point.
But Eric Rosengren, president of the Federal Reserve Bank of Boston, said Fed policymakers must do what they can to bring more relief.
The Fed delivered a strong signal last week at its meeting that it was prepared to act if the economy weakened. High on the list of unconventional tools is buying more government debt, known as quantitative easing.
The goal is to force down rates on consumer and business loans to get Americans to boost their spending. Doing so would help the economy.
In their speeches, Kocherlakota and Plosser expressed skepticism that quantitative easing would drive down rates nearly as much as such efforts did during the recession and financial crisis.
Because financial markets are in better shape now than during the crisis, the difference between the rates on super-safe Treasury securities and rates on other consumer and business loans has narrowed.
“I suspect that it will be somewhat more challenging for the Fed to impact them,” Kocherlakota said.
Plosser said: “Monetary policy is not a magic elixir that can solve every economic ill.”
However, Rosengren said buying more government debt could benefit the economy and therefore should be considered.
