ST. LOUIS (MNI) – St. Louis Federal Reserve President James Bullard
Wednesday said he believes recent Fed actions will push inflation up
towards the FOMC’s implicit target rate.

He makes this argument given that data Wednesday indicates prices
continue to fall in the U.S., making disinflation or deflation more of a
concern.

The Bureau of Labor Statistics Wednesday morning reported the
Consumer Price Index rose a less-than-expected 0.2% in October —
despite a 4.6% jump in gasoline prices — and that the core rate is
running at only an annualized 0.5% increase, while the 12-month core
rate is at only 0.6%, both record lows since the inauguration of the
series in 1957.

Reacting to the CPI report during a briefing with reporters,
Bullard said “for now we’ve got inflation falling and I think its
appropriate for the central bank to take action.”

It is important, he said, “to defend inflation from the low side as
we would from the high side.”

Bullard went on to declare, “I’m fairly confident that quantitative
easing will push the inflation rate back towards target,” referring to
the Federal Open Market Committee’s 2% implicit inflation target rate.

Asked about the intense foreign criticism of the Fed’s decision to
buy an additional $600 billion in U.S. Treasuries, Bullard said. “if the
U.S. has a modest change in monetary policy, other countries are going
to have to have systems in place so they can react to the change in U.S.
monetary policy.”

“This is the way monetary policy has been conducted for a long
time,” he argued.

Bullard continued, “I don’t put a lot of weigh on that criticism. I
don’t see how because one country has an exchange rate target for
instance, that was going to constrain U.S. monetary policy.”

Concern has resurfaced in the financial markets regarding the debt
woes of EMU peripheral members like Ireland, but Bullard counselled
investors to take the long-term view.

“We should view the sovereign debt crisis in Europe in terms of
quarters and years, not weeks and days,” he said. “This is an ongoing
drama in Europe, and will continue to pose a risk for the global economy
over the next 18 months.”

Despite market trepidation and ongoing negotiations between Ireland
and EU authorities, “I do think Europe has done a reasonable job … in
the face of a difficult situation,” Bullard said.

** Market News International **

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