President of St. Louis Fed: ‘Benefits of Quantitative Easing Far Outweight the Risks’

In addition to withering criticism from a number of foreign officials, as detailed here, the Fed’s decision to embark on QE2 has drawn some catcalls from its own ranks.

Dallas Fed President Richard Fisher said QE2 may be the “wrong medicine” for what ails the economy in a speech Monday. Meanwhile, Fed governor Kevin Warsh warns “the Fed can lose its hard-earned credibility — and monetary policy can lose its considerable sway — if its policies overpromise or under deliver,” in a WSJ op-ed Monday.

When the prosecution rested (or at least paused for a breath), St. Louis Fed President James Bullard rose to the defense of QE2 in a presentation Monday at the New York Society of Security Analysts.

The case for more quantitative easing is relatively simple, according to Dr. Bullard: The Fed must take action to prevent a Japan-like outcome. “We don’t want to go there,” he said. “The benefits [of QE2] outweigh the risks.”

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