Bullard Says Bond-Buying Tapering ‘On the Table’ Next Month

Nov. 20 (Bloomberg) -- Federal Reserve Bank of St. Louis President James Bullard talks about the potential for a reduction in the Fed's bond buying, asset prices and the U.S. economy. Bullard speaks with Erik Schatzker on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Federal Reserve Bank of St. Louis President James Bullard, a voter on policy this year who has backed record stimulus, said that a strong jobs report could increase the probability of a December tapering.

“It’s definitely on the table, but it’s going to depend on the data,” Bullard said in a Bloomberg Television interview prior to speaking at “The Year Ahead: 2014,” a two-day conference sponsored by Bloomberg LP in Chicago. “A strong jobs report, I think, would increase the probability some for a December taper.”

When asked how he would quantify strong, Bullard, who was speaking with Bloomberg Television’s Erik Schatzker, said, “I’m going to leave it at strong.”

The Federal Open Market Committee plans to press on with $85 billion in monthly bond buying until seeing substantial improvement in the outlook for the labor market. While U.S. employers last month added 204,000 workers, the Fed probably won’t taper its purchases until a March 18-19 policy meeting, according to the median of 32 economist estimates in a Bloomberg News survey Nov. 8. The next meeting is Dec. 17-18.

Jobs Report

“The jobs report for October was a good one,” Bullard said. “Now we’re looking at 200,000 jobs per month over the last three months; that’s a lot different picture than we were looking at before the jobs report.”

Bullard said he doesn’t anticipate that markets will react dramatically to discussion about taper.

“If we taper because we see a stronger economy, I think the markets will swallow that without a problem,” he said. “In the summer, we were talking about tapering but the data wasn’t coming in very well.”

Bullard has in the past urged the Fed to hold off on slowing its asset purchases or raising interest rates with inflation well below the central bank’s 2 percent target. The Fed will likely keep its target interest rate near zero long after ending the $85 billion in monthly bond buying, and possibly after unemployment falls below 6.5 percent, Fed Chairman Ben S. Bernanke said yesterday.

Bernanke last night emphasized “cumulative progress” as an important factor in discussions over reducing monthly purchases. “The prospect for continued gains,” is also important, he said.

“This cumulative progress argument is the most powerful argument for tapering, because the committee undertook that decision in September of 2012, and we said we’re looking for a better labor market,” Bullard said today. “Well -- you’ve got one.”

To contact the reporters on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net; Jeanna Smialek in Washington at jsmialek1@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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