Interest rates may not be raised until 2012, Federal Reserve Bank of St. Louis president James Bullard told business leaders yesterday.

“Assuming that the most recent recession ended this past summer, and assuming that the [Federal Open Markets Committee] would behave in the same way that it’s behaved in the past, this could mean the FOMC would not start increasing rates until early 2012,” Bullard said in a speech at the Commerce Bank Economic Breakfast in St. Louis, according to a press release from the Fed.

“To be sure,” Bullard said, “the FOMC will be heavily weighing concerns that stem from criticisms that the Fed kept interest rates too low for too long, contributing to the housing market ­bubble.”

“The FOMC did not begin policy rate increases until two and a half to three years after the end of each of the past two recessions,” he said.

Monetary policy, he said, is more than changes in interest rate, noting it is “disappointing” the markets remain focused on interest rates rather than quantitative easing. “The Fed has been conducting successful policy this past year through quantitative easing,” Bullard added.

He noted the Fed’s balance sheet will peak near $2.5 trillion, about three times its usual size, with the monetary base twice its usual amount, “which creates a risk of inflation in the medium term.”

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