Fed urged to start reversing policy
By Jan Lopatka |
March 30, 2011, Wednesday
|
Print Edition
Print Edition
THE United States Federal Reserve's US$600 billion asset-purchase program could be trimmed by some US$100 billion given the recovery in the US economy, St Louis Federal Reserve President James Bullard said yesterday.
He told an economic conference in Prague that US policymakers may not be willing or able to wait for all global uncertainties to be resolved before they begin normalizing their very loose monetary policy.
"One of the things that I'm concerned about is that the policy is so easy right now that we have to get started on the process of getting back to normal, because it will take a long time to get back to normal," Bullard told reporters on the sidelines of the conference in the Czech capital.
When asked if he meant now, he said: "Yes, we're still buying treasuries. We're feeding the fire at this moment."
He said however there seemed to be difference of opinion in the Fed on the speed of reversing monetary easing.
"I think it could be on the order of US$100 billion less than what we had initially thought, but I would leave that up to how the rest of the committee would want."
Risks clouding the economic outlook include the turmoil in the Middle East and North Africa, the aftermath of the Japanese tsunami, the European sovereign debt crisis and the US fiscal situation and possibility of a government shutdown, Bullard said in his speech.
"Because we are so accommodative right now, the FOMC may not be willing or able to wait until every single global uncertainty is resolved before we can begin normalizing policy," he said, referring to the policymaking Federal Open Market Committee.
The Fed has kept short-term interest rates near zero since December 2008 and has bought more than US$2 trillion in long-term securities to push borrowing costs down further and boost recovery from the 2007-2009 recession.
He told an economic conference in Prague that US policymakers may not be willing or able to wait for all global uncertainties to be resolved before they begin normalizing their very loose monetary policy.
"One of the things that I'm concerned about is that the policy is so easy right now that we have to get started on the process of getting back to normal, because it will take a long time to get back to normal," Bullard told reporters on the sidelines of the conference in the Czech capital.
When asked if he meant now, he said: "Yes, we're still buying treasuries. We're feeding the fire at this moment."
He said however there seemed to be difference of opinion in the Fed on the speed of reversing monetary easing.
"I think it could be on the order of US$100 billion less than what we had initially thought, but I would leave that up to how the rest of the committee would want."
Risks clouding the economic outlook include the turmoil in the Middle East and North Africa, the aftermath of the Japanese tsunami, the European sovereign debt crisis and the US fiscal situation and possibility of a government shutdown, Bullard said in his speech.
"Because we are so accommodative right now, the FOMC may not be willing or able to wait until every single global uncertainty is resolved before we can begin normalizing policy," he said, referring to the policymaking Federal Open Market Committee.
The Fed has kept short-term interest rates near zero since December 2008 and has bought more than US$2 trillion in long-term securities to push borrowing costs down further and boost recovery from the 2007-2009 recession.
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