* Fed's Dudley, Bullard both more upbeat on world growth
* Bullard: could slow or end bond buying this year as jobs
* Still no consensus on thresholds on bond buying -Bullard
By Alister Bull and Jonathan Spicer
WASHINGTON/NEW YORK, Feb 1 Two top Federal
Reserve officials painted a picture of cautious optimism on
Friday for the U.S. economy in 2013, helped by stronger global
growth as the central bank aggressively prints money to curb the
nation's lofty rate of unemployment.
The Fed this week decided to keep buying bonds at a $85
billion monthly pace, and hold interest rates near zero until
the jobless rate falls to 6.5 percent, so long as inflation does
not threaten to rise above a threshold of 2.5 percent.
U.S. unemployment edged up 0.1 percentage point to 7.9
percent in January, and the economy shrank slightly in the final
quarter of 2012.
But New York Federal Reserve President William Dudley and
St. Louis Fed chief James Bullard, who both voted in favor of
the U.S. central bank's policy decision this week, saw reasons
to be cheerful about the year ahead.
Their remarks are the first public comments by Fed
policy-makers since the central bank issued a statement on
Wednesday outlining its decision to keep in place an
unprecedented level of monetary stimulus, which has tripled its
balance sheet to almost $3 trillion since 2008.
"I think a lot of uncertainties that were around this
economy in 2012 have come off the table," Bullard told Bloomberg
Television in an interview.
"The (U.S.) election has come off. Some of the fiscal risk
that was in the U.S. has come off. The European situation has
settled down a lot. China looks like it will have a better year.
Emerging markets generally...will have a better year," he said.
U.S. lawmakers on Thursday voted to allow the federal
government to keep borrowing money until at least May 19,
averting a potential collision with the U.S. debt limit that
could have caused the nation to default on its debt obligations.
Politicians had already sidestepped potential tax hikes on
all Americans at the start of 2013 by agreeing to raise taxes
only on families who make more than $450,000 a year.
SLOWING BOND PURCHASES?
Bullard, who is viewed as a centrist on the Fed's 19-member
policy committee, said that continued improvements in the labor
market during the course of the year would put the Fed "in a
position to slow down or stop the purchases."
A closely watched employment report released by the U.S.
government earlier on Friday showed that 157,000 new jobs were
created in January, while the previous two months' scale of
employment creation was also revised higher. U.S. stocks rallied
on the news.
"Things aren't perfect. But things are definitely improving,
and that will actually be helpful for the U.S. outlook," Dudley
told the New York Bankers Association in a speech that was
mostly focused on revamping the wholesale funding market.
"If the rest of the world gets healthier, the demand for
U.S. goods and services will increase and that will provide
support to our own economy," he said.
With the Fed forecasting unemployment to decline only slowly
over the next two years, economists do not expect it to begin
raising interest rates until 2015 and see bond purchases
continuing for the rest of this year and possibly into 2014.
However, minutes of the Fed's Dec. 11-12 meeting, which were
released with a three-week lag, showed that several policymakers
wanted to slow or halt the buying well before the end of 2013.
Bullard, who had opposed the third round of bond purchases
when it was announced in September, said he voted to back its
continuation at the most recent meeting because it was a
decision to keep policy steady.
"I felt that was probably the right thing to do at this
meeting and so I was in agreement with the chairman and the
majority in this case," he said.
However, he made clear that the central bank's policy
committee continued to wrestle with quantitative easing.
Nor was there any consensus on providing markets with more
clues on when the purchases will end, beyond current Fed
guidance that it will look for a substantial improvement in the
labor market outlook in weighing when to stop.
"I don't think we have any more agreement among members at
this point," he said.
Some Fed officials favor adopting numerical economic
thresholds to guide expectations of when buying will end. But
Fed-watchers doubt the committee will be able to quickly come to
a consensus over this matter, and it may prove impossible.