WASHINGTON (MNI) – St. Louis Federal Reserve Bank President James
Bullard Friday said he sees the central bank’s first interest rate hike
coming a year earlier than the current estimate of the Fed’s
policymaking Federal Open Market Committee.
Bullard also said the Fed’s decision to provide a calendar date for
when it expect to raise its target rate might not have been the best
In an interview on CNBC, Bullard was asked to share his expectation
for when the first increase of the federal funds rate would be. His
response: “I’m 2013.”
Bullard will be a voter on the FOMC in 2013.
The FOMC in its formal statement said current conditions will
likely warrant rates staying low until at least late-2014, but Bullard
warned the uncertainty around that date “is pretty wide and the
dispersion on the committee shows that.”
“It’s hard to forecast out six months much less two years or three
years,” he said.
In addition, the late-2014 date “is adjustable” if the economy
changes, Bullard added.
“How do you know what the economy’s going to be like in late-2014?
No one knows, we don’t know … ; this is a best guess and it’s a form
Bullard argued that trying to make promises that far in the future
“is not a credible thing to do” because there are too many factors that
could impact the economy.
“Maybe this wasn’t the right way to go because of this problem of
how do you know what’s going to be going on that far into the future,”
Earlier in the interview, Bullard described the economy as looking
“brighter” in 2012, adding he believes “we can get 3% growth,” and
“unemployment down (to) 7% to 8% by the end of the year.”
Texas Congressman Kevin Brady, vice chairman of the Joint Economic
Committee, has said he will introduce legislation that makes price
stability the sole mandate of the Fed.
Asked to comment, Bullard said the central bank’s policy would be
the same under a single mandate.
The only thing the Fed can do in the long-run is control the
inflation rate, he said.
“By providing stable prices in the economy you allow the prices to
send the right signals to all the suppliers and demanders in the
economy. You get the best allocation of resources that you can get,”
Bullard said. “This is the way you get the best employment boom that you
Going to a single mandate would clarify what the Fed can do in the
long-run, he argued. “It’s ok with me to go to the single mandate.”
Asked to assess the costs of the Fed’s quantitative easing
measures, Bullard said he has been concerned not just about QE but the
very easy U.S. monetary policy.
Arguing that such policies were not meant to be stretched out over
a very long period, Bullard said “I’ve become worried about the effects
on savings in the U.S., that you are discouraging savings.”
Changing people’s life cycle savings patterns could be a possible
detriment for the U.S. economy.
** Market News International Washington Bureau: 202-371-2121 **