WASHINGTON (Reuters) - The head of the St. Louis Federal Reserve Bank said on Thursday the U.S. central bank may want to keep up its bond buying stimulus for now given a drop in inflation expectations.
“Inflation expectations are dropping in the U.S., and that is something that a central bank cannot abide,” James Bullard told Bloomberg television. “We have to make sure that inflation and inflation expectations remain near our target.”
“For that reason, I think a reasonable response by the Fed in this situation would be to ... pause on the taper (of bond purchases) at this juncture and wait until we see how the data shakes out into December,” he said.
Bullard added that he nonetheless had not yet changed his forecast for the U.S. economy, and still viewed a rate hike in the first quarter of next year as appropriate.
By Michael Flaherty; Editing by Meredith Mazzilli