ST. LOUIS (MNI) – St. Louis Federal Reserve Bank President James
Bullard Thursday said he is “a bit concerned about price pressures” but
still sees an inflation rate closer to the Fed’s implicit target of 2%
soon.
Answering questions after delivering opening remarks at the St.
Louis Fed’s Fall Research Policy Conference, Bullard acknowledged that
“economic performance has been slukggish so far this year.”
Bullard repeated he nevertheless sees growth of 2% to 2.5% next
year. “Monetary policy, I think, is appropriately calibrated for this
situation,” he said. “Monetary policy is ultra easy.”
He indicated he is nervous about recent inflation numbers showing
headline CPI running at a 3.9% annual rate and, he added, “I am a bit
concerned about price pressures in the U.S.”
But he said, “I am still sticking with my forecast that the
headline number will return closer to our implicit target of 2% — but
it’s making me nervous that this hasn’t happened so far.”
If the economy weakens further, he said, more quantitative easing
would be the appropriate policy response.
“I continue to think that QE is our most potent weapon and I
continue to think QE would be appropriate if there is further
deterioration in the economic situation in the U.S.,” he said. “I think
QE is still on the table.”
Asked about tying the end of zero rates to some macro variable and
not so much to jobs, he said, “Sometimes unemployment remains at a high
level and doesn’t come down the way you would think it would in a
cyclical sense.”
He said he would be very concerned that tying monetary policy
directly to this variable and then drawing monetary policy off course
for a generation.
On Europe, “I am confident that the Europeans will find ways to
mitigate the situation and get through the economic crisis.”
“I think eventually we will see solutions in Europe and it will not
evolve into a global macroeconomic crisis that would affect the U.S.”
** Market News International **
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