Fed's Bullard: Inflation 'Naturally' Rising Toward Target

Register now

LOUISVILLE, Ky. — St. Louis Federal Reserve Bank President James Bullard said July's inflation figures show prices are headed towards the Fed's target "naturally," and reiterated the position that any tapering decision would be data dependent.

The higher inflation numbers in the July report would be "bolstering the notion that inflation would be naturally moving back towards target in coming months," Bullard told reporters Thursday after a speech in Louisville, Ky. July CPI was as expected at a 0.2% rise overall, with core inflation up 0.2%. These resulted in a 2.0% gain overall and a 1.7% rise in core year-over-year.

But Bullard also pointed out that unemployment "is still quite high by any historical standards in the U.S." He added, "The only reason it looks good at all is because it's come down from even higher levels. Hopefully we'll continue to improve."

Bullard also said the 7% unemployment rate target as the end of the asset buying program was a "soft target," referring to the rate Fed Chair Ben Bernanke mentioned in the press conference after the June FOMC meeting.

The committee didn't put that target rate into the statement at the meeting, Bullard said, "so I'm not sure the committee is ready to adopt that as a hard target."

"For now I would just interpret that as a scenario that the chair put out at the press conference and that it's probably something the committee will have to look at, but it's just not clear the committee is ready to adopt that as a hard target," he continued.

Asked about recent surveys that show many economists expect a tapering decision at the September meeting, Bullard said he would be concerned if surveys like that were really out of line with the Fed's ongoing debate, adding that he "didn't think we were there now."

"I think financial markets understand the debate," Bullard said. "We communicate a lot and the purpose of that is to show what the state of the debate is, and financial markets understand the state of the debate."

Market News International is a real-time global news service for fixed-income and foreign exchange market professionals. See www.marketnews.com.

For reprint and licensing requests for this article, click here.