St. Louis Federal Reserve Bank president James Bullard last week said that the Fed needs to keep the federal funds rate near zero “for an extended period,” but said it will need to start implementing an “exit strategy” next year.
He was not specific on the timing.
Bullard, speaking to the College of Business at the University of Arkansas-Little Rock late Thursday, anticipated possible sales of Fed assets as part of the exit strategy.
Echoing other Fed officials, he said “recent data suggest the economy is stabilizing, and there should be positive economic growth in the second half of 2009.”
Bullard said the housing sector seems to be bottoming and pointed to a slower pace of job losses, but said consumer spending is apt to be slow to recover. He said financial conditions have improved, but are not yet back to pre-crisis levels.
He was also upbeat about external demand for U.S. goods and services. “The international outlook is also showing more positive signs, most recently with France, Germany and Japan reporting positive growth figures,” he said.
Bullard gave no indication that he thinks the Fed should tighten monetary policy in the early stages of economic recovery, but suggested that it needs to do so next year as the economy gains strength.
— Market News International
