The Fed Archives
Aug. 28, 2011, 10:50 a.m. EDT
Fed’s Bullard sees no need for easing
By Greg Robb, MarketWatch
JACKSON HOLE, Wyo. (MarketWatch) — Economic conditions are not at the point now where the Federal Reserve should ease monetary policy further, James Bullard, the president of the St. Louis Fed, told MarketWatch in an interview. on Saturday.
Bullard said he was not convinced that the economy would suffer in coming quarters, as many leading economists are predicting.
“I think there are good reasons to be optimistic even though when you look around these days there is a lot of gloom and doom,” Bullard said.
Bullard said the U.S. manufacturing sector might benefit from a restoration of business activity in Japan in the wake of the March earthquake and tsunami.
“The contacts I have in Japan say that [the recovery] is ahead of schedule and that should be helpful,” Bullard said.
Another potential positive is that oil prices are lower, he said.
“I don’t think we are really to the point where we should ease right now because the economy may pick up,” Bullard said.
In a widely anticipated speech Friday, Fed Chairman Ben Bernanke said he was expanding the next Federal Open Market Committee to two days in late September to consider whether further easing steps were needed.
Many economists attending the Fed’s Jackson Hole conference believe the economy is in serious trouble and easing is inevitable.
Jan Hatzius, chief economist at Goldman Sachs, said the economy was “treading water” and stay below a 2% growth rate through next year.
Several analysts, including Harvard University economist Martin Feldstein, said the economy would fall back into a double-dip recession.
“The probability of a recession is somewhat higher but most models would tell you that it is not extremely high,” Bullard said.
The St. Louis Fed president, who is not a voting member this year, said another reason for caution about easing is that the inflation picture “is a lot different” that last August when the Fed was considering a second round of bond purchases.
The Fed ultimately decided to buy $600 billion of Treasurys in November, under a plan that became known as QE2.
Bullard advocates that the Fed focus on headline inflation instead of a core measure that strips out food and energy prices.
Headline consumer price inflation in July was running at a 3.6% annual rate.