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St Louis Fed's Bullard: Low Inflation Gives Fed Room to Maneuver

JONESBORO, Ark. — St. Louis Federal Reserve Bank President James Bullard Wednesday said inflation is always a worry for him and his monetarist colleagues at the bank, but the low rates recently have given the Fed continued leeway with its accommodative monetary policy.

"We worry a lot about inflation risk," Bullard said in response to a question following a speech to an agribusiness conference at Arkansas State University. "But if you look at inflation today PCE as measured from a year ago actually running at a pretty low level" of 1.2%-1.4%.

"Because inflation is below the 2% target the Fed has some room to maneuver" in continuing its easy policy, said Bullard, who is a voting member of the policy-setting Federal Open Market Committee this year.

Bullard said he has been concerned and "continues to be concerned" about the run-up in farmland prices, although other factors could be in play including the increase in farm incomes.

"Low rates are one aspect of higher farmland prices. I am concerned about the continuing increase in those prices," he said. "Countervailing that you've also got high farm income in the U.S. and that aspect is also making the land more valuable."

He said it is difficult to separate out the fundamentals from the "bubble aspects" of farm prices.

The comments echo concerns expressed by officials at the Kansas City Federal Reserve Bank, whose president, Esther George, was the lone dissenter at the Jan. 30 FOMC meeting.

Asked about the U.S. debt level, Bullard said the United States is "flirting" with an unsustainable level of 90%.

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

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