ST. LOUIS — St. Louis Federal Reserve Bank President James Bullard said Friday Wednesday's meeting of the Federal Open Market Committee was not the right time to begin tapering the Fed's asset purchases, but that third quarter GDP tracking has been moving higher and he is still optimistic growth will pick up next year.
Bullard, who called the decision not to taper at the September meeting a close call, said this month's FOMC meeting "didn't seem to be right juncture to pull back on the pace of asset purchases."
The Fed has been buying $85 billion in Treasuries and agency mortgage backed securities each month, and they surprised financial markets when they didn't begin to taper at their September meeting. Bullard is a voter on the FOMC this year.
"I didn't think we had information that was all that different from September and some of the concerns I had in September were still alive in October so I supported the decision to stand pat," Bullard told reporters after a presentation to financial professionals.
"I think we have a lot of room on the inflation front," he said. "I'd like to see inflation coming back towards target before we make a decision to taper."
Asked if December could be the right time, Bullard said, "every meeting is one where the committee could make the decision, and we'll weigh the data when we have it at that point."
As for the data he's seeing now, Bullard said it's mixed, but pointed to positives, such as the MNI Chicago Business Barometer, which yesterday posted its biggest month-over-month boost in over 30 years, and a potential rebound in consumer confidence now that fiscal concerns are out of the headlines.
"Third quarter GDP tracking estimates have been moving higher," he said, adding that "3%-plus for next year is a very reasonable assumption."
As for data the FOMC members will see before they meet again Dec. 17-18, Bullard said concerns over whether official federal data will be tarnished by the two week partial government shutdown had been overplayed.
"We're always interpreting data that has a certain amount of noise. That's part of our job," he said.
Bullard also said he didn't expect a direct impact from the government shutdown on the overall economy. "The mechanics of the budget deal, sort of pushing off into January and February, by itself, I don't think that had very much impact on the macroeconomy," he said noting workers will get back pay and contractors will still have to finish work, it'll just be shifted.
Bullard was also asked about comments Friday morning from Philadelphia Fed President Charles Plosser calling for the Fed to identify a target size for its latest quantitative easing program.
Bullard said he thought it "would be a mistake to go back to the way we handled QE1 and QE2" when it comes to defining a target amount or specific end date for purchases.
"In those programs, we set final dates and amounts that we intended to purchase and simply ended on those dates," he said. "However, the end dates turned out to be when the economy wasn't performing as well. And this sent a confusing signal because we were removing accommodation when the economy didn't seem to warrant us removing accommodation."
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