By Peter Kennedy
VANCOUVER, March 2 St. Louis Federal
Reserve Bank President James Bullard said on Friday the U.S.
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 U.S. 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
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
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
SEES U.S. JOBLESS RATE FALLING
Bernanke told Congress this week there are reasons to
question whether recent steep declines in the unemployment rate,
which has tumbled from 9.1 percent in August to 8.3 percent 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
percent by the end of the year.
A WARNING ON HOUSING
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.