Bullard: Better U.S. Deficit Situation Shows Growth Improving

Federal Reserve Bank of St. Louis President James Bullard said an improving U.S. debt and deficit situation is signaling sustained growth in the American economy.

Bullard, speaking to reporters after a panel dicussion in Montreal, said he’s surprised inflation isn’t closer to the Fed’s 2 percent target, even though a series of automatic, across-the-board government spending cuts has improved the nation’s fiscal balance.

“The deficit and debt situation is improving in the U.S. and that’s a reflection of sustained growth,” Bullard said. “It’s another indication that the U.S. outlook is improving, but like I say, you would expect inflation would be running higher if that was the case and that’s not happening, so it’s a little bit of a head-scratcher.”

Standard & Poor’s raised the U.S.’s AA+ credit rating outlook to stable from negative, based on receding fiscal risks, less than two years after stripping the world’s largest economy of its top ranking. Bullard said he hadn’t yet seen today’s S&P report.

“I’d be surprised if the Congress has done enough really to get us back onto a sustainable path,” he said. “They’ve done some things through the sequester and through the New Year’s Eve deal and some tax changes, and better growth. These factors have all improved the U.S. fiscal outlook but there’s much more to be done. We really need to get our medium-run and long-run house in order.”

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