LONDON (MNI) – The US economy is being held back by uncertainty
over both domestic, notably fiscal issues, and events in the euro area,
James Bullard, President and CEO of the Federal Reserve Bank of St.
Louis, says.
Bullard says the effects of the extension of Operation Twist, the
move to extend the average maturity of the Fed’s own portfolio, are
uncertain and will take time to materialise. With uncertainty abounding,
Bullard questioned whether the US economy would meet current forecasts
through the remainder of this year.
Bullard noted estimates that the Twist extension was equivalent to
a 25-50 basis point cut but said “Given the lags in the effects of
monetary policy, it will now take some time to see the impact of this
action and to see whether or not the economy can meet the current set of
expectations on performance during the remainder of 2012.”
Delivering the OMFIF Golden Series Lecture here Bullard highlighted
the challenges facing the US economy.
It is “being held back by significant uncertainties both within the
U.S. and globally. Uncertainty is inhibiting both household and investor
behavior,” he said.
“The U.S. fiscal situation is similar to that of some countries in
Europe and requires dramatic and sustained attention. The political
compromise in the U.S. has been to delay action until after the
November election, but markets tend to pull the uncertainty forward,”
Bullard added.
–London Bureau; Tel: +44207862 7492; email: dthomas@marketnews.com
drobinson@marketnews.com
[TOPICS: MMUFE$]
