The Federal Open Market Committee needed to send a stronger signal that it will "defend" its inflation target against low inflation, Federal Reserve Bank of St. Louis President James Bullard said in a statement Friday.
A dissenter against the FOMC statement released Wednesday, Bullard said, "the Committee should have more strongly signaled its willingness to defend its inflation target of 2 percent in light of recent low inflation readings."
With inflation lower than expected this year - with the personal consumption expenditures headline inflation rate less than 1% in the past 12 months, and PCE core inflation near 1% -- Bullard said, "to maintain credibility, the Committee must defend its inflation target when inflation is below target as well as when it is above target."
Bullard termed "inappropriately timed" the FOMC's decision to allow Federal Reserve Board Chairman Ben Bernanke "to lay out a more elaborate plan for reducing the pace of asset purchases."
In the Summary of Economic Projections, the FOMC marked down "its assessment of both real GDP growth and inflation for 2013, and yet simultaneously" indicated "that less accommodative policy may be in store." Bullard believes "a more prudent approach would be to wait for more tangible signs that the economy was strengthening and that inflation was on a path to return toward target before making such an announcement."
Also, by offering an approximate timeline for scaling back asset purchases, the FOMC stepped back "from state-contingent monetary policy," which he "feels strongly … is best central bank practice, with clear support both from academic theory and from central bank experience over the last several decades. Policy actions should be undertaken to meet policy objectives, not calendar objectives."
Despite his criticisms, the statement said Bullard believes "the Committee can conduct an appropriate and effective monetary policy going forward, and he looks forward to working with his colleagues to achieve this outcome."
