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Bullard: Low Inflation Gives FOMC 'Room to Maneuver' on Balance Sheet

St. Louis Federal Reserve Bank President James Bullard said Thursday that the low inflation rate gives the Fed's policymaking Federal Open Market Committee "room to maneuver" on the size of the Fed's balance sheet, repeating comments he has made recently.

But Bullard again said the FOMC should be prepared to incrementally change the size of Fed asset purchases as the economy evolves, not just automatically continue to buy $85 billion a month of Treasury and mortgage-backed securities as it is now doing.

He suggested the FOMC might change the amount of bond buying by "$10 or $15 billion" per meeting and likened that to a 25 basis point change in the federal funds rate. He said the change could be "up or down" as he spoke to reporters following a speech at the New York University Stern School of Business.

As an FOMC voter, Bullard supported open-ended purchases of $85 billion of bonds a month, even though he had previously argued that converting the $45 billion a month of "Operation Twist" Treasury security purchases into outright purchases would make monetary policy overly stimulative.

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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