WELLESLEY, Mass., Nov 1 (Reuters) - The Federal Reserve should buy bonds at least until the U.S. jobless rate falls below 7.25 percent, a top Fed official said on Thursday, pitching a plan that would set the clearest end point so far for the central bank's quantitative easing program.
Under the view from Boston Fed President Eric Rosengren, who is one of 19 Fed policymakers, the U.S. central bank's large-scale asset purchases would continue as long as inflation expectations remained subdued, and they would not necessarily stop once the 7.25 percent jobless threshold is crossed.
Wading deeper into the debate over what parameters the central bank should use for maintaining its ultra-easy monetary policy, Rosengren, in remarks prepared for delivery at Babson College, said he would like the Fed to keep interest rates near zero until the jobless rate falls to 6.5 percent.
The unemployment rate was 7.8 percent in September. The government will report labor market figures for October, including the jobless rate, on Friday.
The weak U.S. labor market and stumbling economic growth prompted the Fed in September to launch a third round of quantitative easing, or QE3, under which it is buying $40 billion worth of bonds per month, with no set end date.
The Fed has said it will buy mortgage debt and possibly Treasuries until the labor market outlook improves ``substantially'' - a term Fed policymakers are now attempting to define. Rosengren's take is the most specific yet.
``My own personal assessment is that as long as inflation and inflation expectations are expected to remain well-behaved in the medium term, we should continue to forcefully pursue asset purchases at least until the national unemployment rate falls below 7.25 percent and then assess the situation,'' Rosengren, a voter on Fed policy next year, said.
``But my own personal view is that if inflationary pressures remain muted, then labor market conditions would need to be more like 6.5 percent unemployment to warrant the federal funds rate being lifted off the zero bound.''