FRANKFURT (Reuters) - A top U.S. Federal Reserve official said on Tuesday he could not envisage a good case for tapering the Fed’s purchases of bonds at the moment due to the low inflation rate.
The Fed is currently purchasing $85 billion worth of bonds every month. It next meets on June 18-19 to review policy and there has been some speculation it might signal a readiness to taper the program, although most economists think it will keep buying bonds for the bulk of 2013, based on recent mixed data.
St. Louis Federal Reserve Bank President James Bullard, a voting member of the Fed’s policy-setting committee this year, said he did not think the time was right to taper the purchases.
“Inflation is pretty low in the U.S.. I can’t envision a good case to be made for tapering unless the inflation situation turns around and we are more confident than we are today that inflation is going to move back toward target,” he told reporters after giving a lecture in Frankfurt.
“I’m definitely keeping an eye on the fact that our inflation rate is quite low and I think that’s a major consideration in whether we should taper or not.”
Bullard added: “I do think we should be willing and ready to change the pace of purchases when the time comes but I don’t think we are there yet.”
Reporting by Eva Kuehnen and Paul Carrel