WASHINGTON Feb 19 U.S. labor market conditions
are improving and the Federal Reserve should base future policy
decisions on this view, a top Fed official said on Wednesday.
St. Louis Fed President James Bullard said despite a debate
among economists about the drivers behind the recent fall in the
U.S. jobless rate, he still saw the headline unemployment rate
as a good indicator of overall labor market health.
"In particular, the recent, relatively rapid declines in
unemployment can be understood as representing an improving
labor market," he said in remarks prepared for delivery to the
"This is the judgment that should inform monetary policy
Bullard, a centrist who does not vote on policy this year,
did not discuss the concrete outlook for Fed asset purchases or
monetary policy in his remarks.
The Fed has begun to cut back its asset buying with the aim
of winding these up next year, shifting much of the focus on
future policy moves to interest rates.
The U.S. central bank has said it expects not to raise
benchmark rates until well after the unemployment rate falls
below 6.5 percent, especially if inflation remains below target.
For some time, the Fed has said it would be appropriate to
keep rates exceptionally low at least as long as the jobless
rate stayed above that level.
The jobless rate fell to a new five-year low of 6.6 percent
in January but a drop in the number of Americans working or
looking for work has sparked a debate about whether the Fed is
linking policy moves to the right indicators.
The participation rate remains near a 35-year low at 63.0
percent, which some argue is due to demographic factors such as
an ageing population and others see as a reflection of business
Bullard, an honorary professor of economics at Washington
University in St. Louis, said he was inclined to think cyclical
components were less important in driving down participation,
but more research was needed on issues like how to better
include household decision-making in economic models.