Bullard: Plausible That More Action Will Not Be Effective

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NEW YORK – It’s “plausible” that individuals who were able to respond to low yields have done so, and further policy actions will not help those who have yet to respond, according to Federal Reserve Bank of St. Louis President and CEO James Bullard.

Discussing “Housing, Monetary Policy, and the Recovery” by Michael Feroli, Ethan Harris, Amir Sufi, and Kenneth West, at the Monetary Policy Forum, Bullard said, “The authors … argue that, while the central bank can influence yields, those that can respond to the lower yields have done so already and those that cannot will not be influenced by further policy actions because they are backed up against sharply binding collateral constraints,” according to prepared text of the speech, which was released by the Fed. “I think this is an interesting and plausible hypothesis. Wealth effects could influence the economy not only through collateral constraints but also through distributional effects.”

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