The head of bond-fund giant Pimco says Federal Reserve Chairman
Ben Bernanke should avoid any suggestion the U.S. central bank
intends to pursue new purchases of Treasury bonds and instead use a
much-anticipated Friday speech to press for economic reforms.
Mohamed El-Erian, in an opinion essay published Thursday on the
Financial Times' website, wrote that Bernanke would likely
encounter little political support for extending the Fed's policy
of "quantitative easing," dubbed "QE3." Moreover, "expectations are
far ahead of what he can reasonably deliver in terms of economic
outcomes," El-Erian added.
The chief executive of Pacific Investment Management Co. said
Bernanke's speech Friday at a Fed event in Wyoming could best be
used as a forum from which to launch fresh efforts to fix the
struggling U.S. economy.
"Rather than embark on another policy initiative ('QE3') with
questionable net benefits, it would be better for Mr. Bernanke to
use his Jackson Hole speech to reframe the national policy debate
and, in the process, set the stage for President Barack Obama's key
economic announcements on September 5.
"The time has come for the American policy narrative to be much
more explicit about the structural challenges facing the country
and, critically, set the stage for proposing to Congress a
comprehensive package of self-reinforcing reforms. Mr. Bernanke can
facilitate this by using his Jackson Hole remarks as the warm-up
act for Mr. Obama's critical speech on the economy next month.
Anything beyond this would run the risk of the Fed building another
costly bridge to nowhere."
Website: www.ft.com
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