Fed’s Bullard opposes tapering of QE amid slowing inflation

Federal Reserve Bank of St. Louis President James Bullard, who dissented for the first time last month over the issue of defending the Fed’s price goal, said the central bank shouldn’t trim its monthly bond purchases until inflation accelerates toward its 2% target.

“Pulling back on accommodation as inflation is sinking is not the right combination,” Bullard, who votes on monetary policy this year, said today in a Bloomberg Television interview with Michael McKee to air July 15. “I’d like to see us do more” to ensure inflation doesn’t continue to slow.

Bullard last month dissented against a pledge by the Federal Open Market Committee to maintain its $85 billion in monthly bond buying, saying the panel should “signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings.”

Inflation as measured by the personal consumption expenditures price index rose 1% for the year ending May, below the central bank’s 2% goal.

Price gains have been “very low,” Bullard said today. “I’d at least like to see inflation tick up a little or get some kind of reassurance” that it “will come back toward our target.”

Bernanke’s Timetable

Chairman Ben S. Bernanke said on June 19 that the FOMC may taper bond purchases later this year and end the program around mid-2014 as long as the economy performs in line with the Fed’s forecasts. About half the 19 participants on the FOMC favor ending the program by year’s end, according to meeting minutes released this week.

Philadelphia Fed President Charles Plosser, who has opposed the Fed’s current round of asset purchases, said today the central bank should begin trimming monthly bond buying in September and end the unorthodox stimulus by year-end.

“I don’t want to do it all at once, but I think we should begin to taper very soon and hopefully end it by the end of this year,” Plosser said today in a separate Bloomberg Television interview to air on July 15. “That would be a healthy thing for the economy. We can do it gradually,” Plosser said.

Plosser, who doesn’t vote on monetary policy this year, has repeatedly spoken out against additional easing by the Fed.

In a speech to the Global Interdependence Center in Jackson Hole, Wyoming, Bullard said a recent surge in U.S. Treasury yields may stem from “increased optimism” about the economic outlook, adding that forecasts for growth have proven too optimistic during the past several years.

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