Monday, March 28, 2011

Fed's Bullard: Fed Should Consider Ending Quantitative Easing

According to James Bullard, St. Louis Federal Reserve Bank President, the economy seems to be doing well enough so that the $600 billion purchase in Treasury securities should end. This is interesting gven all the mess in the world right now.
Some if his comments in Marseille, France:

“The economy is looking pretty good,”

“It is still reasonable to review QE2 in the coming meetings, especially this April meeting, and see if we want to decide to finish the program or to stop a little bit short,”
While the economy is stronger than last summer and fall and quantitative easing should be reviewed, uncertainties remain, including Japan, political tensions in the Middle East, the U.S. fiscal position and the European sovereign debt crisis, Bullard said. U.S. first-quarter gross domestic product may not be as strong as anticipated several weeks ago, and some strengthening may get pushed into the second quarter, he said.

The oil price increases so far are “not enough to derail the U.S. recovery at this level,” “If oil prices stabilize where they are, we’ll be fine.” "Prices would have to go substantially higher for there to be a significant and material effect,”

On ending QE2: “We have to weigh those in the decision” “We’re far away from normal policy,” “I think it’s important to take a few steps back to normality. Even if you make a few small moves, monetary policy will still be accommodative for some time to come.”

End but restart...
“balance sheet should be contingent” and the "Fed should be ready if the economy turns down"

“If the economy is as strong as I think it is then I think it may be reasonable to send a signal to markets that we’re going to start withdrawing our stimulus, and I’d start by pulling up a little bit short on the QE2 program,” “We can’t be as accommodative as we are today for too long, we’ll create a lot of inflation if we do that.”

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