Fed's Bullard: beware basing policy off optimistic forecasts

JACKSON HOLE, Wyo., July 12 Fri Jul 12, 2013 3:18pm EDT

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JACKSON HOLE, Wyo., July 12 (Reuters) - The substantial rise in bond yields since last month is not justified by an improvement in U.S. economic data or a rise in inflation, a senior Federal Reserve official said on Friday, warning it reflects optimism that may prove to be too rosy.

"Recent FOMC (Federal Open Market Committee) decisions have met with a substantial rise in Treasury yields, and I have suggested that a possible justification for the rise in yields is increased optimism concerning future U.S. macroeconomic performance," said St. Louis Federal Reserve President James Bullard in prepared remarks.

"However, given recent forecasting performance, we should be careful in using an optimistic forecast to justify current policy decisions. A more prudent approach would be to wait to see if better macroeconomic outcomes materialize in the months and quarters ahead," he told a monetary policy conference here.

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