LONDON (MNI) – The minutes of the last FOMC meeting are a “bit
stale” and data since then have been somewhat stronger, says St Louis
Federal Reserve President and Federal Open Market Committee member James
Bullard told CNBC television today.
Yet Bullard said that growth had disappointed expectations.
The comments followed the release of minutes for the last meeting
in the FOMC overnight, with markets seeing them as dovish in their clear
hints at further QE.
“Growth has not come in as strongly this year as we
expected…Things haven’t been where we’d like them to be,” he said.
Bullard continued:
“I do think the minutes are a bit stale as we’ve had some data
since then that has been somewhat stronger,” he said.
Bullard also said that growth of around 2% in the second half of
2012 would be strong enough for the Fed to keep its monetary policy
stance on hold.
“If we were to resume, which I think we will, you know 2% growth,
maybe a bit stronger than that in the second half of this year,
unemployment ticks down through the rest of the year, that’s not a great
outcome but to me it’s a good enough outcome to keep us on hold,” he
said.
Bullard also said that although the Fed has said it will keep rates
on hold until 2015, he thinks they will have to be raised in late 2013.
“I have an earlier date (for raising rates), I’m late 2013,” he
said.
Turning to discuss the US fiscal situation, Bullard said that he
thinks the lack of a fiscal deal was adversely effecting the US economy,
adding that he was concerned that the Fed’s actions were facilitating a
buildup in US government debt.
“I do worry that we are facilitating a debt build up in the US,” he
said.
He also signalled his concerns on the euro zone crisis, saying he
had become pessimistic on the zone’s capacity to deal with the
situation.
The Fed official described the crisis as “not good, still a
wildcard” but added that the current effects of the European crisis
on the US economy were relatively minor.
“The direct effects from the European recession, they are there,
they are tangible but they’re relatively minor compared to a financial
meltdown-type effect,” he said.
Bullard also said that he was concerned that a further round of
quantitative easing would complicate the Fed’s exit strategy when the
time comes to tighten monetary policy.
“It would complicate the exit strategy, it would make it more
difficult when the time comes. Frankly, I think our Operation Twist is
also complicating the exit strategy,” he said.
–London newsroom 4420 78627492 email: ukeditorial@marketnews.com
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