Fed will 'stay the course,' Dudley says (by Greg Robb)

WASHINGTON (MarketWatch) - The Federal Reserve will "stay the course" of its easier monetary policy until the economy is clearly rolling, William Dudley, president of the New York Federal Reserve Bank, said Tuesday. "If you're trying to get a car moving that is stuck in the mud, you don't stop pushing the moment the wheels start turning - you keep pushing until the car is rolling and is clearly free," he remarked in a speech to the Morris County Chamber of Commerce in Florham Park, N.J. Dudley said the benefits of the Fed's third round of asset purchases, or QE3, "substantially" exceeded the costs. While headline inflation may edge higher for a few months on higher energy and grain prices, fundamentals are in line with the central bank's 2% inflation target, he added. Dudley also said that QE3 was designed to increase confidence in the recovery, and if successful, may lead to a rise in long-term Treasury yields, a jump in expected returns on private assets and a decline in risk premiums. "This matters because such shifts would provide support to the economic recovery," he commented.