The Federal Reserve needs to take action to bring down unemployment, which affects millions of Americans, said William Dudley, president of the Federal Reserve Bank of New York, in a lecture Oct. 25 in Call Auditorium, Kennedy Hall.

In the speech "How Goes the Recovery? Challenges for the Nation, the Region and the Fed," Dudley noted that the U.S. central bank has already cut interest rates to near zero and bought $1.7 trillion in mortgage-related and Treasury debt to lower borrowing costs.

The U.S. Federal Reserve cannot "wave a magic wand," Dudley cautioned, to fix the economy overnight, but it can provide "essential" support.

With $2.3 trillion on the Federal Reserve's balance sheet -- its assets and liabilities -- Dudley said he and his colleagues will increase the balance "only as long as is necessary." In response to a question about the large amount of securities on the balance sheet, he said, "Make no mistake, we can manage our balance sheet." Dudley explained that in 2008 the Fed was authorized to pay interest on securities on its balance sheet, allowing the Fed to prevent inflation.

Dudley said the decision has yet to be made on whether to continue to expand the Fed's balance sheet, as officials need to weigh in on the positives and negatives. On the one hand, it could ease financial conditions and support markets, said Dudley. But, he added, the questions are whether it would complicate the exit from this policy down the road and if it is worth taking on interest rate risk.

The Fed will use whatever tools it has at its disposal to achieve its "dual mandate" of promoting maximum employment and price stability, he added.

Speaking specifically about the Ithaca region, Dudley said that we are seeing a "mild recovery." The recession we experienced here was not as deep as the country as a whole experienced, he added.

"The dynamic we see in Ithaca is really encouraging," he said. He predicts that new jobs will be more knowledge based than labor based, which will be a positive since we will not have to rely on typical manufacturing jobs.

Job creation is really about innovation, Dudley said, and innovation doesn't seem to be slowing. Higher education is a huge competitive advantage for the United States, he said, as we have "the best higher education by far." Another advantage we have is our entrepreneurial culture; that, combined with higher education, will continue to contribute to job growth, he said.

While on campus Dudley also conducted a radio interview with WRVO- FM; toured Kionix Inc., a university spinoff company that designs and manufactures microelectromechanical devices using a proprietary plasma micromachine; lunched with Ithaca business leaders; and talked with Professor Eswar Prasad's class, China's and India's Growth Miracles.

Graduate student Grady Brimley is a writer intern for the Cornell Chronicle.