Tags: Fed | Bullard | Stimulus | Inflation

Fed’s Bullard: More Stimulus May Fuel ‘70s-Style Inflation

Thursday, 17 Nov 2011 09:07 AM

The Federal Reserve has said it would keep interest rates low through 2013 and is aware of the inflationary risks of its ultra-loose monetary policies, says Federal Reserve Bank of St. Louis President James B. Bullard.

The Federal Reserve hikes and cuts interest rates with a dual mandate to keep both inflation and unemployment rates in comfort zones.

Unlike in other countries, the Federal Reserve does not set specific targets with such figures but the recent announcement that rates would stay low for two years was unprecedented, as normally, Fed officials make more open-ended forecasts.

Bullard didn't agree with that call.
__________________________________________________________

The ‘Unthinkable’ Could Happen — Wall Street Journal
Over one million Americans have heard the evidence for 50% unemployment, 90% stock market crash, and 100% inflation. Be prepared. Watch the Aftershock Survival Summit Now, See the Evidence.

__________________________________________________________

"I didn't like the calendar date being put in the statement. I don't think you should ever make policy based on the calendar. You should make policy based on the state of the economy," Bullard tells CNBC.

"I think the 2013 makes it seem like we're making policy changes."

bullard.jpg
James Bullard
(Federal Reserve Bank of St. Louis file photo)
But the Fed will do what it says.

"We promise to stay at zero through at least — remember the words at least — mid 2013."

On top of keeping interest rates low, the Federal Reserve has purchased trillions of dollar in assets from financial institutions, injecting oceans of liquidity into the economy with the aim of pumping up investments and ultimately, hiring.

Low rates and hefty asset purchase have fueled criticism that the Fed is fueling inflationary pressures, although Bullard says such policies were necessary.

"We've done many, many things that are outside the normal realm of monetary policy. We've been very innovative," Bullard says.

In the end, however, there is only so much the Fed can do.

"Now if you try to push really hard on this and push even harder, you might get a lot of inflation in the U.S., and you might replay the 1970s, and I'm telling you, people will not be happy if we go to that situation."

The recession scare in the U.S., meanwhile, is waning.

"I do think the recession scare has passed. We have better data, better hard data on the U.S.," Bullard says.

"I think we're in, you know, good shape compared to what we thought might happen. We didn't fall off the cliff."

Separately, some Federal Reserve officials won't totally rule out the chances of the U.S. falling back into recession, especially if the European debt crisis escalates and drags down global financial systems.

"Prudence suggests that the fragile state of the U.S. economy would not easily withstand turbulence coming across the Atlantic," Federal Reserve Bank of San Francisco economists write in a report.

"A European sovereign debt default may well sink the United States back into recession. However, if we navigate the storm through the second half of 2012, it appears that danger will recede rapidly in 2013."

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
StreetTalk
The Federal Reserve has said it would keep interest rates low through 2013 and is aware of the inflationary risks of its ultra-loose monetary policies, says Federal Reserve Bank of St. Louis President James B. Bullard. The Federal Reserve hikes and cuts interest rates with...
Fed,Bullard,Stimulus,Inflation
2037
2011-07-17
Thursday, 17 Nov 2011 09:07 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved