Federal Reserve Bank of St. Louis President James Bullard said he expects U.S. economic growth to pick up in the second half of the year, after a report showing the economy expanded less than forecast in the second quarter.
“This is all confirming what we already knew, which is that the first half has not been as strong as we’d like,” Bullard said of today’s Commerce Department report in an interview with CNBC Television.
The U.S. economy grew less than forecast in the second quarter after almost stalling at the start of the year, Commerce Department figures showed today. Gross domestic product rose at a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter that was less than previously estimated.
Bullard said issues that plagued the economy in the first half of the year, such as the March earthquake in Japan, high oil prices and the European debt crisis, have largely subsided. One uncertainty that remains is whether lawmakers will reach a deal to cut the nation’s budget deficit in time to raise the debt-ceiling by Aug. 2.
“We’ll get a deal and then we’ll have those uncertainties off the table,” Bullard said in the interview. “We’re in better shape for better growth in the second half of the year.”
Bullard said that while central bankers need to react to economic data and make policy adjustments accordingly, the Fed is already pursuing an “ultra-easy monetary policy.”
“We’ve got interest rates at zero, they’ve been at zero for a long time, we’ve got the extended period language and we’ve got an enlarged balance sheet, which we ratcheted up with QE2,” he said.
The Federal Open Market Committee voted on June 22 to conclude its $600 billion bond-buying program as scheduled at the end of last month, and to maintain its balance sheet near record levels by reinvesting proceeds from its securities holdings. Central bankers also pledged to leave interest rates low for an “extended period.”
“We still have a very easy policy, it’s threatening higher inflation in the U.S. economy,” Bullard said. “We have to be cognizant of that moving forward.”
Bullard, 50, has led the St. Louis Fed since 2008. Fed presidents rotate voting on monetary policy with Bullard next voting in 2013.