Bullard Fears Market May 'Lose Faith’ In Fed

Federal Reserve Bank of St. Louis president James Bullard expressed concern yesterday about financial market perceptions of the Fed’s willingness to raise interest rates and end its quantitative easing policy in a timely way.

Bullard, a voting member of the Federal Reserve Board’s policymaking Federal Open Market Committee, warned that markets could “lose faith” in the Fed’s commitment to undo the asset purchases that swelled its balance sheet and bank reserves.

He also said markets could interpret the Fed’s stated expectation that the federal funds rate will remain “exceptionally low … for an extended period” as the equivalent of an inflexible interest-rate “peg.”

Bullard, in remarks prepared for the Swedbank Economic Outlook Conference in Stockholm, said the U.S. and global economic recovery remains “on track.”

— Market News International

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