Fed could reduce bond buys on par with labor healing: Bullard

NEW YORK Thu Feb 21, 2013 12:32pm EST

President and CEO 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 and CEO 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

NEW YORK (Reuters) - The Federal Reserve could reduce its asset purchases on par with the level of improvement in the troubled U.S. labor markets, a top Fed official said on Thursday.

St. Louis Fed President James Bullard, a voting member of the Fed's monetary policy committee this year, said the currently low inflation readings may give the Fed some leeway to continue its quantitative easing program longer than it would otherwise.

The U.S. central bank is buying $85 billion in bonds per month to lower longer term borrowing costs, encourage investment and spending, and boost the stop-start U.S. economic recovery. It has repeated it will buy the bonds until the labor market outlook improves substantially.

But "substantial labor market improvement" does not arrive suddenly, Bullard said at New York University, according to prepared remarks. "This suggests that as labor markets improve somewhat, the pace of asset purchases could be reduced somewhat, but not ended altogether."

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

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