“The U.S. has a large cloud” from uncertainty, Bullard said, though the likelihood of a recession is no more than normal next year.
If the U.S. economy encountered another shock, Bullard said “the committee can respond as appropriate to a significant deterioration” in the outlook.
In his formal presentation, Bullard said near-zero interest rates could be creating “distortions” in the economy, including “punishing savers.”
While generally opposed to more spending, Bullard told reporters he could see room for narrowly targeted programs such as retraining to address a mismatch of worker skills and jobs. “In aggregate, I do think there is a skills mismatch” with former construction workers, for example, lacking the education for jobs in a “hot sector” like technology, he said.
Payrolls climbed by 115,000 workers in April, the smallest increase in six months, Labor Department figures showed. The jobless rate fell to a three-year low of 8.1% as people left the labor force, adding to worries that the economic expansion is cooling.
Fed officials have been discussing how much of the U.S. unemployment rate has been caused by “structural” factors such as a mismatch of worker skills and available jobs. Richmond Fed President Jeffrey Lacker said the mismatch may lead to a higher natural rate of unemployment. Fed Chairman Ben S. Bernanke said “continued weakness in aggregate demand is likely the predominant factor” in unemployment.
“Labor market policies such as unemployment insurance and worker retraining have direct effects on the unemployed,” Bullard said in his presentation.
In his speech, Bullard also repeated his call for the Fed to produce a quarterly monetary policy report that would “provide a more fulsome discussion of the outlook for the U.S. economy.”
Lacker, as well as the presidents of Fed banks in San Francisco, Atlanta and Philadelphia, have said since the FOMC meeting that more Fed stimulus probably won’t be needed.
In a press conference following the April 24-25 meeting, Bernanke signaled that further easing is unlikely unless the economy unexpectedly deteriorates. Bernanke said it would be “reckless” to pursue policies that would drive up inflation when it’s already near the Fed’s target, while noting he’s “prepared to do more” should conditions worsen.
Bullard, who doesn’t vote on monetary policy this year, was the first Fed official in 2010 to call for a second round of asset purchases by the central bank. The Fed pushed down its target interest rate close to zero in December 2008 and has engaged in two rounds of asset purchases totaling $2.3 trillion to boost the economy.
Bullard, 51, joined the St. Louis Fed’s research department in 1990 and became president of the regional bank in 2008. His district includes Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.