The Federal Reserve could begin raising interest rates by the end of 2011, says Fed Bank of St. Louis President James Bullard.
The Fed probably won't rush to tighten monetary policy when it ends its bond-buying program in June, but it is "reasonable" to assume that a stronger economy and rising inflation rates will merit action by the end of 2011, Bullard says, according to The Wall Street Journal.
|Fed's James Bullard
(Fed Bank of St. Louis photo)
"We do have rising inflation and rising inflation expectations making me a little bit nervous," Bullard says.
"We’ve got to start taking some steps to start to tighten monetary policy as we continue on through 2011 to make sure we don’t allow inflation to get away from us."
Fed officials have said that the $600 billion bond buyback program, which aims to boost the economy as well as send stock prices rising, should end as scheduled in June although the fate of near zero interest rate levels remains unclear.
Fed Chairman Ben Bernanke has said the U.S. economy has not recovered from the deep recession, adding a weak housing market is slowing growth.
"Our economy is far from where we would like it to be," Bernanke says, according to Reuters.
The U.S. economy grew at an annual rate of 1.8 percent in the first three months of the year, although unemployment is at 8.8 percent, way above pre-crisis levels.
"Obviously, the problems in the labor market and the housing market are not unrelated," Bernanke says.
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