Bullard Says Two-Day Meeting Gives FOMC Time to Mull Options
St. Louis Federal Reserve Bank President James Bullard said adding a second day to the central bank’s September meeting gives officials time to review easing options, though rising inflation may prevent near-term action.
“If the economy is weaker and the inflation picture moderates, we could consider more action,” Bullard said today in a Bloomberg Radio interview in Jackson Hole, Wyoming. “The call is much more difficult this year than last year. We have a much different inflation situation than last year.”
Chairman Ben S. Bernanke said today in a speech at a Fed conference at Jackson Hole that the central bank still has stimulus tools, while not providing details or committing to deploying them. Policy makers will meet for two days next month to “allow a fuller discussion” of the economy and the Fed’s possible response, he said.
The Federal Open Market Committee will be able to review additional economic reports before its Sept. 20-21 meeting, which may confirm or conflict with policy makers’ view that growth will accelerate in the second half, Bullard said.
The U.S. economy expanded at a 1 percent annual rate from April through June, down from a 1.3 percent prior estimate, revised Commerce Department figures showed today in Washington.
“A lot of forecasters have been marking down” their outlooks, he said. “Is that really what’s going to happen? We want a better feel for where the economy is headed.”
Bullard said he disagreed with the assessment of Harvard University economist Martin Feldstein that the U.S. faces a “better-than-even chance” of recession, saying none of the forecasting models he looks at suggest such odds.
Bond Buying
A third round of asset purchases by the Fed may be considered if the inflation outlook moderates, Bullard said.
“I have called it our most potent tool,” though purchasing bonds carries risk and can generate higher prices, he said. “I think it is still on the table.”
Any new easing could face more opposition from Fed presidents. Dallas Fed President Richard Fisher, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis voted against the August statement that pledged to keep rates near zero at least until mid-2013. The last time three voters dissented was on Nov. 17, 1992, under Bernanke’s predecessor, Alan Greenspan.
Fiscal policy must play a role in supporting growth, along with monetary policy, Bullard said.
“Monetary policy cannot do everything,” Bullard said. “We can do our part, but that is only one part of the macroeconomic picture.”
To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Kathleen Hays in Jackson Hole, Wyoming, at khays4@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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