Federal Reserve Bank of St. Louis President James Bullard said that policy makers at the central bank may be nearing consensus about clearly stating their goals for the rate of inflation.
“I think we’re very close to having inflation targeting in the U.S.,” Bullard said in a Bloomberg Radio interview today. “This may be the opportunity to get something done that everyone on the committee can rally around.”
“I think it would come in the form of some kind of statement from the committee that would name a target but would also reiterate some of the things we’ve said over the years about how keeping inflation low and stable contributes to great economic performance overall,” Bullard said, referring to the policy-setting Federal Open Market Committee.
Fed officials decided at their December meeting to publish their own expectations for monetary policy in the future. Those forecasts will be made public for the first time following the Fed’s Jan. 24-25 meeting. A subcommittee of Fed policy makers is working on a draft statement of the central bank’s “longer-run goals and policy strategy.”
Bullard, in the interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt, said that such a statement should focus more on inflation than unemployment.
The Fed “should not tie monetary policy decisions explicitly to the unemployment rate because the unemployment rate is a somewhat mysterious economic variable,” Bullard said, citing the experience of Europe over the last two decades where unemployment for the region has not fallen below 7 percent.
The U.S. economy is gaining strength in the new year, Bullard said.
“We had a surprisingly weak first half for 2011 but a lot of the temporary factors that kept the first half of 2011 down reversed in the second half of 2011,” he said. “Now the most logical prediction for 2012 is to say that that increase will continue and we’ll see more strength in 2012 than we saw in the second half of 2011. Like a GDP growth rate of 3 to 3.5 percent.”
“I think most forecasters are a bit too pessimistic,” said Bullard, 50, who became president of the St. Louis Fed in 2008.