SEOUL, South Korea — Paul Volcker, an adviser to President Barack Obama, said Friday that the Federal Reserve should be cautious about taking further unconventional monetary easing measures, which could risk fueling inflation.
Belief that economic recovery is achievable by spurring inflation is an “illusion,” the former Federal Reserve chairman said at a news conference in Seoul.
“We’ve learned that lesson, and I hope we continue to learn that lesson. We should never forget that,” he said after delivering a speech on rebalancing the global economy.
Volcker said short-term U.S. interest rates have almost no room to go down further while long-term bond prices are under pressure from increasing concerns about future inflation. The Fed has cut its benchmark rate to almost zero and bought $1.7 trillion in securities, but this has so far failed to put the U.S. economy on a firm footing on the path to recovery. Dow Jones Newswires
