Fed's Bullard: no hurry to taper because of low inflation

WASHINGTON Mon Nov 4, 2013 9:44am EST

James Bullard, President of the St. Louis Federal Reserve Bank, speaks during an interview with Reuters in Boston, Massachusetts August 2, 2013. REUTERS/Brian Snyder

James Bullard, President of the St. Louis Federal Reserve Bank, speaks during an interview with Reuters in Boston, Massachusetts August 2, 2013.

Credit: Reuters/Brian Snyder

WASHINGTON (Reuters) - The Federal Reserve should not rush a decision to scale back its asset purchase program because of low inflation, a senior U.S. central banker said on Monday.

"For me, you don't have to be in a hurry because of low inflation," St. Louis Federal Reserve President James Bullard told CNBC television.

Bullard, who at the Fed's policy meeting last week voted in favor of maintaining the central bank's monthly bond buying campaign at an $85 billion monthly pace, said he wanted to see inflation heading back toward policy-makers' 2 percent goal before tapering bond buying.

Inflation has been running much closer to 1 percent, he noted.

The Fed held fire on deciding to begin reducing asset buying after a bitter partisan battle in Washington that led to a 16-day partial government shutdown and flirted with a devastating debt default.

A deal was eventually forged to reopen the government and raise the U.S. borrowing limit until early in the new year, meaning the fiscal showdown could resume in a matter of months.

Bullard said he did not think the shutdown in itself would do lasting harm to the economy, although he acknowledged that the political fighting had hurt confidence. But the Fed should not wait for a permanent budget deal before taking policy action.

"I think we can't really wait for the political situation in Washington to be just right because, evidently, they could be bickering forever," he said.

He also played down the impact that the central bank's leadership transition would have on decision-taking, after President Barack Obama nominated Fed Vice Chair Janet Yellen to take over the helm from Ben Bernanke when his term expires at the end of January. Yellen's appointment must be confirmed by the U.S. Senate.

"I don't think the committee would put very much weight on anything like that. It is a continuous process and it is a committee that is making the policy and they want to adjust at the right time," Bullard said. He also said that he expected she would help ensure policy continuity once she was in charge.

(Reporting By Alister Bull; Editing by W Simon and Chizu Nomiyama)

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