Fed's Bullard Says There's Ambiguity on Date for Bond
Bloomberg News
Federal Reserve Bank of St. Louis President James Bullard said policy makers haven't committed to a specific month to end bond purchases even as it would take a significant shift in the outlook to alter the path of tapering.
'There's a little bit of ambiguity around the notion of when the QE program ends,' whether in October, December or January, Bullard said today in a Bloomberg Television interview in Hong Kong with Betty Liu, referring to quantitative easing. 'Sometimes you see in the markets different interpretations of that, and frankly the committee has not really talked about that.'
The central bank, at the same time, would probably change the path of reducing bond-buying only if the 'economy was moving off track in a significant way from what we had previously expected,' Bullard said in a separate panel discussion today. U.S. Treasury yields rose last week after Fed officials indicated that interest rates over the next two years may rise faster than previously anticipated.
Fed Chair Janet Yellen said in a press briefing after last week's policy meeting that borrowing costs could start rising 'around six months' after ending monthly bond purchases. Atlanta Fed President Dennis Lockhart said on March 25 six months 'is really a minimum, not a maximum.'
Bullard, who doesn't vote this year on the Federal Open Market Committee, said in today's interview that he doesn't think 'policy has really changed' and that Yellen's six-month comment wasn't that different from what financial-market participants were already expecting.
Playing Card
Speaking about changing the pace of tapering bond purchases, Bullard said in the panel at the Credit Suisse Asian Investment Conference that 'it's a big deal if the FOMC decides to alter that pace in either direction, so I think the committee would be very careful about playing that card.'
The FOMC in a post-meeting statement last week gave itself room to keep borrowing costs low by dropping a linkage between the benchmark interest rate and a specific level of unemployment.
'We know we're not close to full employment, not close to an employment level consistent with our mandate, and unless inflation were a significant concern, we wouldn't dream of raising the federal funds rate target,' Yellen said at the press conference.
In deciding how long to keep interest rates low, the committee will look at a 'wide range of information,' including labor market conditions, inflation expectations and financial markets, she said. The Fed also reduced the monthly pace of bond purchases by $10 billion, to $55 billion.
The Fed is overhauling forward guidance after unemployment declined toward 6.5 percent, its previous threshold for a rate increase, faster than policy makers predicted.
To contact the reporters on this story: Morwenna Coniam in Hong Kong at mconiam@bloomberg.net; Steve Matthews in Atlanta at smatthews@bloomberg.net
To contact the editors responsible for this story: Scott Lanman at slanman@bloomberg.net; Chris Wellisz at cwellisz@bloomberg.net Arran Scott
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