By Jason Lange and Pedro da Costa
Feb 22 The U.S. Federal Reserve will keep its
monetary policy stance loose for a long while despite increasing
signs of concern among policymakers about the potential costs of
asset buying, a top Fed official said on Friday.
"Fed policy is very easy and it's going to stay easy for a
long time," James Bullard, St. Louis Fed president, said in an
interview with CNBC television.
Minutes released from the U.S. central bank's policy meeting
last month showed a number of officials think the Fed might have
to slow or stop buying bonds before seeing the pickup in hiring
which the program is designed to deliver. Bond buying is one of
the key elements in the Fed's monetary stimulus.
Many analysts nevertheless think the Fed's leadership will
determine the economic benefits of the maintaining the bond
purchases for some time are likely to outweigh the financial
Bullard, who has a vote this year on the Fed's policymaking
Federal Open Market Committee (FOMC), has expressed caution
about expanding the central bank's balance sheet too far. He has
advocated scaling back the bond purchases as the labor market
On Friday, Bullard acknowledged more voices within the FOMC
are pressing to scale back bond buying. Some Fed members are
concerned their easy monetary policy could soon fuel inflation.
"The idea of tapering the program at some point in the
future may be gaining some steam on the committee," he said.
But Bullard also noted that the inflation rate is not
threatening to breach the Fed's 2 percent target.
"The Fed has room to maneuver because of this," he said.
The Fed has more than tripled the size of its balance sheet
since 2008 to around $3 trillion through a series of bond-buying
programs. It opted in January to keep purchasing assets at an
$85 billion monthly pace until the U.S. labor market outlook
In a policy shift late last year, the Fed committed to
keeping interest rates near zero until the unemployment rate
drops to 6.5 percent, as long as inflation is not forecast to go
above 2.5 percent over a one- to two-year horizon. The jobless
rate stood at 7.9 percent in January.
While many analysts expect the Fed to keep its bond-buying
program in place throughout 2013, some worry this could fuel
asset bubbles. Bond-buying programs in other countries are also
seen as exacerbating this risk.
"I don't think they (in the Fed) are vigilant in terms of
other central banks and their quantitative easing policies,"
Bill Gross, founder and co-chief investment officer of bond
giant PIMCO, told the same CNBC program. "And I don't think they
are vigilant in terms of asset prices."