HONG KONG — The Federal Reserve could bring forward the timing of the first rate hike of the cycle from late 2014 if recent data suggesting an improvement in the U.S. economy continues, Federal Reserve Bank of St. Louis president James Bullard said Friday.
Bullard, who is not a voting member of the policy-setting Federal Open Market Committee, told reporters at a briefing here that the first hike could come in late 2013, while acknowledging the committee’s end-of-2014 timeframe.
The FOMC “has said that the first rate increase will be late 2014, but there is a lot of uncertainty about that date. If we continue to get better data about the U.S. economy, I think the likely move would be to shorten the time until the first rate increase,” he said.
“I think late 2013 could be the date of the first rate increase, but I am just one man and the committee’s judgment is 2014.”
Bullard warned the Credit Suisse Asian Investment Conference of the threat posed by inflation, arguing in response to questions from the audience that “abnormal” borrowing costs can’t last for too long.
“Could we get a sharp rise in inflation? I think that’s very much a concern in this environment,” he said, noting the rising Chinese costs on the global and U.S. inflation outlook.
Bullard played down the oil price threat, arguing that prices at the pump would need to hit $5 per gallon “before you had an oil shock or energy shock behavior,” but he also made it clear that policy needs to return to a more normal footing in the coming years.
Bullard ruled out any need for a third round of quantitative easing, barring a “significant deterioration” in either the U.S. economic or inflation outlook.