Bullard says Fed may raise its benchmark rate by June 2014

Economic Outlook

Bullard is willing to alter monthly purchases by $10 billion to $15 billion depending on shifts in the economic outlook, he said to reporters after his speech.

The Standard & Poor’s 500 Index fell 0.9% to 1,498.15 at 2:18 p.m. in New York. The yield on the 10-year Treasury note declined four basis points, or 0.04 percentage point, to 1.96%.

The St. Louis Fed chief said he sees weaknesses in the use of unemployment as a threshold for an interest rate change.

“The use of thresholds is not a panacea,” he said in his speech. “The FOMC cannot pretend to target medium- or long-term unemployment.”

Also, “the Committee needs to reiterate that it considers many more variables in attempting to gauge the state of the U.S. economy” and that hitting the thresholds for employment or inflation shouldn’t be viewed as a trigger for policy action.

Bullard didn’t comment on recent economic reports in his presentation.

Claims Rise

Initial claims for unemployment benefits rose for the first time in three weeks by 20,000 to 362,000 in the week ended Feb. 16, the Labor Department reported today. A separate report showed the Consumer Price Index was little changed. Over the past 12 months it has risen 1.6%, the smallest year-over-year gain since July.

Bullard, 51, backed the FOMC decision last month to continue monthly securities purchases after the economy shrank 0.1% during the fourth quarter. The Fed in December 2008 cut the main interest rate close to zero to bring down borrowing costs and fuel economic growth.

Bullard joined the St. Louis Fed’s research department in 1990 and became president of the regional bank in 2008. His district includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

Bloomberg News

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