WASHINGTON (MNI) – The Federal Reserve was premature in its
decision to announce more aggressive measures to jolt the economic
recovery back following the meeting of its policymaking Federal Open
Market Committee earlier this month, and instead should have adopted a
wait-and-see approach, St. Louis Federal Reserve Bank President James
Bullard said Wednesday.

“I didn’t really think the committee had a good case for taking a
really big action right at this juncture,” he said in an interview on
CNBC.

Bullard does not count himself among the senior Fed officials that
are constantly opposed to additional easing — he was an early advocate
of the late 2010 $600 billion asset purchases program, commonly known as
QE2 — but on this occasion “I didn’t think we had the case right at
this meeting.”

“I would have kept it in our pocket for a little bit and really see
if the global slowdown is going to impinge on the U.S. economy, and what
the next steps in Europe are going to be — we’ve seen that heating up
in the last couple of days,” he said.

“So I would have liked to have taken more of a wait-and-see posture
about this and then go forward from there,” Bullard added.

The FOMC announced Sept. 13 that in addition to its maturity
extension program, it will buy $40 billion in mortgage-backed securities
a month — and undertake additional asset buying if needed — until it
sees a significant improvement in the labor market, for a total of $85
billion in monthly asset purchases.

It also pushed out its forward guidance — how long its expects
interest rates to remain close to zero — to mid-2015 from late-2014.

In its statement announcing the additional quantitative easing
measures, the FOMC did not set an end date, indicating that it would
continue so long as the outlook for the labor market does not improve
substantially.

Bullard said he favored a meeting-by-meeting approach to balance
sheet policy.

“I think this is a better approach to policy,” he said.

What the economy needs, Bullard said, is a deal on fiscal policy
that would put the U.S. house in order.

In contrast to the usually bland second revisions for U.S. growth
data, second quarter GDP was revised down to a 1.3% annual rate from the
previous 1.7%, the Commerce Department reported early Friday.

Bullard said, “we kind of already knew that the second quarter was
slower than the first.” Still, the economy remains on track for 2%
growth in the second half of the year and then “a little bit faster” in
2013, he added.

“I also think that unemployment will continue to tick down here
through the end of the year as it did in the last jobs report,” Bullard
said.

He described the slowdown in the global economy as “concerning,”
and said the U.S. might either benefit from the flight-to-safety, or get
dragged down by the rest into a slow growth environment or even a
recession.

So while both of those possibilities need to be considered, “I
would have wanted to see more data on that and see how that’s unfolding
before we took action,” Bullard said.

** MNI Washington Bureau: 202-371-2121 **

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