Fed's Stein backs QE3, says policy remains effective
BOSTON, Nov 30 (Reuters) - The Federal Reserve should continue buying long-term bonds to support economic growth until the outlook for U.S. employment gets considerably better, Fed Board Governor Jeremy Stein said on Friday.
Stein, a Harvard finance professor who joined the Fed in May, defended the effectiveness of the unconventional monetary policies the U.S. central bank has undertaken since the financial crisis and deep recession.
Indeed, he argued they have not only brought down rates on long-term government bonds, but also have made it cheaper for corporations to borrow in capital markets.
"While this is not entirely uncontroversial, my own reading of the evidence is that there has also been substantial pass-through to corporate bond rates," Stein said in remarks prepared for delivery at a conference in Boston.
He estimated that an additional $500 billion on Treasury purchases would lower long-term bond rates both in the government and corporate markets by around 0.15-0.20 percentage point.
(Reporting by Jonathan Spicer; Writing by Pedro Nicolaci da Costa; Editing by Leslie Adler)