Tags: fed | bullard | easing | economy

Fed’s Bullard: Minutes Are ‘Stale,’ More Easing Isn’t Definite

Thursday, 23 August 2012 08:07 AM

The Federal Reserve's recently released minutes of a policy meeting that pointed to growing support for monetary-stimulus measures are a bit "stale" because the U.S. economy has appeared to improve in the last month, said Federal Reserve Bank of St. Louis President James Bullard.

The Fed's minutes from its latest monetary policy meeting cited a need to roll out a new round of stimulus, likely quantitative easing, if the economy doesn't pick up the pace of its recovery.

Quantitative easing, under which the Fed buys bonds such as Treasury holdings and mortgage-backed securities from banks, softens the dollar with the aim of kick-starting recovery and sends stocks and higher-risk assets climbing.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

The Fed has rolled out two rounds of quantitative easing since the downturn, injecting trillions into the economy.

The minutes covered the Fed's July 31-Aug. 1 meeting, but signs of recovery have emerged since then.

"I do think that the minutes are a bit stale because we have some data since then that's been somewhat stronger," Bullard told CNBC.

Retail sales have beat expectations as have consumer sentiment figures and industrial production data, among others, including unemployment data.

The economy grew 2 percent in the first quarter of this year but cooled that pace to 1.5 percent in the second quarter.

If it can pick up the pace just a bit, expect the Fed to consider staying on the sidelines.

"If we were to resume, and I think we will, 2 percent growth, maybe a bit stronger than that in the second half of the year, unemployment ticks down through the rest of the year, that's not a great outcome but that's a good enough outcome to keep us on hold," Bullard said.

Markets tend to rally on talk of Fed intervention.

"Probably the best thing to talk about here is what would that action really be," said Bullard, who will be a voting member of the policy-setting committee next year. "I think the markets have the idea of some gigantic action. I'm not sure if the data really warrants that."

Many Federal Reserve policymakers said additional stimulus would probably be needed soon unless the economy shows signs of a durable pickup, according to the minutes.

The Fed has cut interest rates to near zero and pledged to maintain exceptionally low interest rates until late 2014, while purchasing $2.3 trillion of bonds to push down long-term borrowing costs to support a fragile U.S. recovery.

Fed Chairman Ben Bernanke, who last month said a third asset-purchase program was an option, will update his policy outlook on Aug. 31 with a speech to the Kansas City Fed’s annual symposium in Jackson Hole, Wyo.

Meanwhile, Bullard voiced unusually blunt skepticism over the outlook for the eurozone and warned that the best hope might be for the region to just "muddle through" its sovereign debt crisis.

Bullard, interviewed on CNBC, said he was "pessimistic on Europe's ability to deal with this" due to the lack of sufficiently robust institutions, and said central bank programs propping up individual countries risked politicizing monetary policy.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

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Thursday, 23 August 2012 08:07 AM
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