Calling the Federal Open Market Committee’s setting of 2014 as the time for a possible change in rates “an unwarranted pessimistic signal,” Federal Reserve Bank of St. Louis president James Bullard warned Thursday that conditions at that time could still be “exceptionally poor.”
“If the economy is performing well at the point in the future where the promise begins to bite, then the committee may simply abandon the promise and return to normal policy,” Bullard said.
“But this behavior, if understood by markets, cancels out the initial effects of the promise, and so nothing is accomplished by making the initial promise,” he said.
The recent positive data allowed the FOMC “to pause in its aggressive easing campaign,” Bullard told the 13th Annual InvestMidwest Venture Capital Forum, according to a press release from the bank.
“An appropriate approach at this juncture may be to continue to pause to assess developments in the economy,” he said. “The ultra-easy policy has been appropriate until now, but it will not always be appropriate.”
