By Shihoko Goto
Washington, June 13 (BridgeNews) - One of the Federal Reserve's foremost objectives is to ensure long-term price stability as a means to encourage "maximum sustainable growth," Fed Vice Chairman Roger Ferguson repeated Wednesday. He was testifying before the Senate Banking Committee at a hearing on his confirmation for a new term.
"Congress has given the Federal Reserve three monetary policy objectives: maximum employment, stable prices and moderate long-term interest rates. We have viewed these objectives as congruent with a goal of maximum sustainable rowth, which can occur only in the context of long-run price stability," he said in prepared remarks released in advance of his testimony.
Ferguson stressed the need for the Fed to be able to deal with changes in the economic environment. In particular, he underlined the importance of productivity growth spurred by technological advances.
"Fast growth in productivity and the reactions of businesses and households to this acceleration of productivity" have required "substantial adjustments" in the Fed's monetary policy in recent years," he said.
Ferguson also pointed out that the Fed's responsibilities are not restricted to monetary policy but also include banking regulations as well as the country's payments system.
President Bush in early March his intention to nominate Ferguson to a new term as a Fed governor. Assuming he is confirmed by the Senate, Ferguson's term on the Fed board would expire in 2014. His current term as vice chairman expires in 2003. Ferguson's previous term as Fed governor expired in January 2000, but he was able to continue serving on the 7-member Fed board. Ferguson joined the Fed as a governor in November 1997 to fill an unexpired term ending Jan. 31, 2000. He was then chosen by former President Clinton in 1999 to be vice chairman upon the resignation of Alice Rivlin.
Clinton re-nominated Ferguson to another term as Fed governor, but the Senate Banking Committee failed to act on the nomination last year. With the Democratic Party takeover of Senate control last week, Sarbanes moved quickly to proceed on Ferguson's nomination. Ferguson came to the Fed from McKinsey and Co., a consulting firm, where he managed studies regarding financial institutions. During his tenure at the Fed, Ferguson generally has been a supporter of the monetary policies pursued by Fed Chairman Alan Greenspan. Ferguson was extensively involved in international efforts on the Year 2000 computer conversion within the financial services industry and also has been active on ayment systems issues. There are currently two other vacancies on the Fed board and Gov. Edward Kelley, who has been on the Fed for 14 years, announced this week he would resign when one of those vacancies was filled. Last week, the White House announced that Bush intended to nominate Tennessee banker Susan Bies to one of the seven seats on the Fed's Board of Governors. Bies will be nominated to a 14-year term and would fill the seat formerly held by Susan Phillips, who resigned in 1998. According to a White House official, Bies' term would expire in January 2012. Her nomination is also subject to Senate confirmation.