–Continued Signs of U.S. Economic Recovery
By Brai Odion-Esene
WASHINGTON (MNI) – St. Louis Federal Reserve President James
Bullard warned Thursday that a potential sovereign credit default poses
a risk to the continued economic recovery in the United States.
Noting ongoing signs the economy is healing, Bullard said the one
risk to the outlook is the fallout from potential sovereign debt default
as conditions continue to deteriorate in Greece and other countries.
He pointed to the rising costs of sovereign debt protection in
Greece, as well as in Portugal, Spain and Italy.
Bullard also voiced concern about the debt burdens of U.S. states,
noting the high debt to personal income ratio of the 10 most populous
In remarks to the Century Club at Washington University’s Olin
Business School, Bullard noted the growing number of economic indicators
showing improvement, such as employment growth, manufacturing, vehicle
sales and consumer spending.
“There are continued signs of recovery. GDP growth has been
positive for three consecutive quarters,” Bullard said. “Manufacturing
has rebounded, and labor market conditions are slowly improving.”
However, the high unemployment rate, the corporate bond market as
well as the absence of a rebound in residential and non-residential
construction remain negatives for the U.S. economy, Bullard said.
Turning to the current debate in Congress about U.S. financial
regulatory reform, Bullard called for the Federal Reserve to retain its
“The Fed should continue to supervise state member banks and bank
holding companies of all sizes. Understanding the entire financial
landscape helps the Fed make sound monetary policy decisions,” Bullard
He argued that the Fed’s regional structure is designed to keep
some power out of New York and Washington and allow for input on key
policy questions from around the U.S.
“It is important that the Fed remain connected with Main Street
America, and not become biased toward the very large, mostly New
York-based institutions,” he said.
Bullard also warned that current proposals for auditing monetary
policy could diminish the independence of the Fed.
“Erosion of Fed independence could result in a 1970s-style period
of volatility. The consequences for the U.S. and the global economy
would be large,” Bullard said.
** Market News International Washington Bureau: 202-371-2121 **