Volcker does not expect Shock and Awe from Federal Reserve

"I don't look for any overpowering results

of this action,"

Reporting by Rachel Armstrong

11/2/10

SINGAPORE (Reuters) - Former Federal Reserve Chairman Paul Volcker said on Tuesday he did not expect "overpowering results" from any policy easing the central bank adopts this week to try to revive the U.S. economic recovery.

The Fed is widely expected to resume purchases of longer-term Treasuries to inject cash into the economy following a two-day meeting that ends on Wednesday. Many analysts expect the Fed to announce a $500 billion buying program over about six months.

"I don't look for any overpowering results of this action," Volcker, currently chairman of the Obama administration's Economic Recovery Board, said in Singapore as part of a dialogue on financial reform.

He said a fresh injection of Fed cash into the economy could create a risk of inflation longer term, but "I don't think it's beyond the capacity of a central bank to deal with that problem... but they're going to have to deal with it."

He was speaking at the National University of Singapore.

More from Bloomberg

By Shamim Adam
Nov. 2 (Bloomberg) -- Former Federal Reserve Chairman Paul Volcker, an adviser to President Barack Obama, said quantitative easing may spark inflation in the future and the amount involved may be a cause for concern.

“When money is too easy for too long, we will have more” asset bubbles, Volcker, 83, said in Singapore today.

He was commenting as Fed policy makers prepare to meet today and tomorrow in Washington amid concern that economic growth is not strong enough to reduce a U.S. unemployment rate close to 10 percent. The Fed may announce a plan to purchase at least $500 billion of long-term securities in a move known as quantitative easing, according to economists surveyed by Bloomberg News.

Fed Chairman Ben S. Bernanke said on Aug. 27 that the central bank “will do all it can” to sustain the recovery. Investors are anticipating policy makers will announce another round of asset purchases after buying $1.7 trillion in debt from December 2008 to March. More at Bloomberg