(Adds quotes from Bullard, background)
By Michael Flaherty
HONG KONG, March 26 The U.S. unemployment rate
will fall below 6 percent by the end of this year, a Federal
Reserve official said on Wednesday, offering a bullish view on
the country's economy after central bank comments sent shock
waves through financial markets last week.
James Bullard, president of the Federal Reserve Bank of St.
Louis, said that the outlook for the U.S. economy is "quite
good," despite data from early in the year.
"The biggest thing is that unemployment has come down more
quickly than expected," said Bullard, speaking on a panel at the
annual Credit Suisse investor conference in Hong Kong.
He added later during a question and answer session that
more progress is needed in the labour market before U.S.
policymakers can consider raising interest rates.
Bullard is known to be one of the Fed's more hawkish
policymakers. He previously advocated for a rate hike as early
as 2014, a stance he appears to have backed away from.
U.S. monetary policy tightening took centre stage last week
after a two-day policy meeting, when the Fed said it expected to
keep benchmark interest rates near zero for a "considerable
time" after it wrapped up a bond-buying stimulus program, which
it is widely expected to do toward the end of the year.
Pressed on the statement at a news conference afterward, Fed
Chairman Janet Yellen said the phrase "probably means something
on the order of around six months or that type of thing." Stocks
and bonds immediately tumbled as traders took the statement to
suggest rate hikes could come sooner than they had anticipated.
Bullard has joined other Fed officials in playing down the
"six months" comment from Yellen, saying it was in line with
what the private sector was anticipating. He repeated that view
The unemployment rate for February rose to 6.7 percent from
a five-year low of 6.6 percent as Americans flooded into the
labor market to search for work.
But the rate hovering around the Fed's previous 6.5 percent
benchmark has raised the prospect of the central bank moving to
push up rates more quickly than some in the market previously
Fed officials appear increasingly worried that keeping
policy so easy for so long could encourage investors to take too
many risks, building bubbles that may eventually pop and roil
The U.S. economy is "set for a pretty good year," Bullard
said on Wednesday. "Despite the spate of weaker data in the
January, February time frame."
The Fed has held rates near zero since late 2008 to help the
economy recover from the 2007-2009 recession.
Bullard was asked about where he saw interest rates in 2016,
at which point he referred to his "dot."
The Fed introduced a "dot chart" in its January 2012
economic projections. Each dot represents the view of an
individual policymaker on how they see the appropriate level of
interest rates for the coming few years.
"I'm here to tell you that my dot has not changed," Bullard
Data on Tuesday showed U.S. consumer confidence surged to a
six-year high in March and house prices increased solidly in
January, positioning the economy for stronger growth after a
weather-induced soft spot.
(Additional reporting by Saikat Chatterjee and Twinnie Su;
Editing by Kim Coghill)