Arab Today, arab today fed’s bullard optimistic on us economy
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Fed’s Bullard optimistic on US economy

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Arab Today, arab today Fed’s Bullard optimistic on US economy

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St Louis Federal Reserve Bank President James Bullard has said the US economic outlook is brighter and household confidence has improved, suggesting he sees no need for further steps to ease financial conditions. “I think the data is coming stronger on the US economy. I think it’s a good time to wait and see and gather more data, get a better read on what’s going on in Europe, and see what is going to happen next,” he told reporters after a speech at Simon Fraser University. Bond buying would be a potent tool, and it would have important effects on the economy, Bullard said. “But we already have a lot of things on the table,” he said. However, Bullard said he would have reservations about any further Fed bond buying because it could accelerate an already sharp recent climb in energy prices. Some Fed officials believe high unemployment and sluggish growth demand another round of quantitative easing to kick the recovery into higher gear, while others, including Fed Chairman Ben Bernanke, have suggested renewed bond buying remains an option should the recovery lose steam. “I would be concerned that we not undertake a policy move like QE that would possibly feed into a global increase in oil prices,” he told reporters after a speech at Simon Fraser University. After the Fed announced its second round of quantitative easing in November 2010, commodity prices around the world rose, in part because as the dollar’s value fell, other assets rose in price. Bernanke told Congress this week there are reasons to question whether recent steep declines in the unemployment rate, which has tumbled from 9.1 per cent in August to 8.3 per cent in January, will continue because growth is slow and incomes have increased only modestly. But Bullard said he expects unemployment to continue to edge lower, and sees no inconsistency with modest growth and steady labor market gains. “I think unemployment will continue to get better,” he said, in response to questions after a speech at Simon Fraser University. “I don’t really have in my mind the idea that you’ve got to get the rapid growth in order to get the unemployment rate to come down.” Bullard, who is not a voter on the Fed’s policy-setting panel this year, said he expects unemployment to decline to 7.8 per cent by the end of the year. While Bullard has in the past been seen as a centrist among Fed policymakers, he favors raising benchmark overnight rates in 2013, earlier than the consensus view that tightening will happen in late 2014. The Fed cut rates to near zero in December 2008, and it has bought $2.3 trillion in bonds to stimulate growth. At its January meeting, the Fed said the sluggish pace of growth and a high unemployment rate suggest the central bank won’t begin to raise rates until almost three years from now. The Fed’s next meeting is March 13. At that meeting, officials will have to weigh signs that the recovery is exceeding expectations against worries that rising oil prices will deal another setback to growth. Bullard warned against trying to prop up struggling housing markets. Several Fed officials have said taking steps to prevent home foreclosures and clear a backlog of unsold homes could stimulate faster growth “It is not feasible or desirable to attempt to re-inflate the bubble,” he said. Discussing the Federal Reserve’s monetary policy tools, Bullard said that should the central bank determine it needs further monetary accommodation, it could decide to push back the date it expects to raise rates for the first time. Contributing to the more positive outlook, recent actions by the European Central Bank to provide liquidity to stressed financial markets through long-term financing appear to have calmed European markets, Bullard said. —

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