Although not currently a voting member of the FOMC, the views of Eric Rosengren, Boston Fed President, still carry some weight. In a WSJ article, Rosengren argues that the Fed should commence an open-ended program of bond-buying, because its current stance continues to fail to meet either aspect of its mandate, namely sustainable growth and price stability. Rosengren contends that the program should remain in force until these objectives are satisfied, and that the bond-buying ought to include mortgage-backed securities.
The policy prescription of Rosengren is at one extreme and will no doubt be tempered by the moderate views of other Fed officials. If the Fed were to travel down this path of unlimited QE, then it would have significant (negative) ramifications for the dollar. It would also incur the wrath of international policy-makers and investors. For now, Rosengren’s dovish disposition stands little chance of being adopted but if it comes to pass that the economy falls back into recession either later this year or early next year because of fiscal strangulation, then no doubt Fed Chairman Bernanke will consider such an approach.
