Bullard: Fed risks putting itself in a "box" by targeting unemployment

MEMPHIS Thu Oct 4, 2012 10:58pm EDT

President of the Federal Reserve Bank of St. Louis James Bullard poses during an interview at the Federal Reserve Bank of St. Louis June 8, 2011. REUTERS/Peter Newcomb

President of the Federal Reserve Bank of St. Louis James Bullard poses during an interview at the Federal Reserve Bank of St. Louis June 8, 2011.

Credit: Reuters/Peter Newcomb

MEMPHIS (Reuters) - The U.S. central bank risks limiting its policy flexibility by explicitly tying its actions to a numerical unemployment target, a senior Federal Reserve official said on Thursday.

"I think this threshold thing will put the committee in more of a box," said St. Louis Federal Reserve President James Bullard, voicing disagreement with fellow policymakers, referring to the Federal Open Market Committee (FOMC).

Minutes of the FOMC's September meeting showed that many committee members favor a commitment to lower the jobless rate beneath a certain level before raising interest rates, in order to better communicate its determination to bolster U.S. growth.

(Reporting By Alister Bull; Editing by Paul Simao)

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Comments (1)
Jeremiahliang wrote:
Bullard’s minority view in the FOMC committee is the right view: How could any rational economist buy the argument that the wealth effect via QE3 will create jobs? It is a huge presumption to think that CEOs or small businesses in the US will start raising capital spending and hiring when their share prices or equity net worth increases.

The US is facing a liquidity trap and no amount of money printing is going to create employment. In fact, QE3 is detrimental to the structural recovery of the US: it destroys the savings rate as it delays households from deleveraging, it creates future commodity inflation which will erode consumer purchasing power and it misallocates capital to financial assets from real hard assets.

If there is any good thing that we can expect from a Romney presidency if he wins, it is that he will not reappoint Ben Bernanke.

Oct 05, 2012 2:56am EDT  --  Report as abuse
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