April 15, 2015 / 2:45 PM / 2 years ago

Fed's Bullard says 'no problem' with hiking then returning to zero

WASHINGTON, April 15 (Reuters) - A top Federal Reserve official said on Wednesday that it’s okay for the Fed to raise interest rates and then return to near-zero levels if the economic data shows that the central bank needs to retreat.

“I don’t think there’s a problem with that,” St. Louis Federal Reserve President James Bullard said, referring to the issue of hiking rates soon and then lowering them shortly afterward if economic growth drops.

Central banks have come under criticism for having to quickly reverse course on borrowing costs, and Fed officials have said they do not want to hike rates too early, only to have to lower them again.

Bullard is the second Fed official since last week to say that there is no shame in the central bank hiking rates and then falling back if necessary. Richmond Fed President Jeffrey Lacker last week said hiking and then going back to near zero rates if the data demands it is okay.

Bullard, speaking to reporters after a speech at the Hyman Minsky annual conference here, also said he supports expanding the Fed’s reverse repurchase program if the market demand is there.

Reporting by Michael Flaherty; Editing by Chizu Nomiyama

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