Fed's Rosengren: Stimulus should be removed gradually

FXstreet.com (Łódź) - Boston Fed President Eric Rosengren said today in a speech at the Connecticut business and industry association that as long as inflation remains below the 2% target, the US economy continues to be at risk.

"At very low inflation rates, a sizable negative shock to the economy can result in negative inflation - deflation - which can become entrenched in expectations, leading to a protracted period of deflation," one of the Fed's most dovish officials emphasized.

Rosengren, who dissented against the FOMC's decision last month to reduce the central bank's bond-buying program, acknowledged the recent improvements in the US economy, reminding at the same time that the Fed should not only look at employment but also at inflation, which remains persistently low.

"As the economy continues to improve, we should reduce and ultimately remove the unusual support" Rosengren said. "But this support should be removed only gradually."