Bloomberg News

Bullard Says Asset Purchases ‘Must Be Employed Carefully’

November 16, 2011

(Adds comments on recession scare in fourth paragraph.)

Nov. 15 (Bloomberg) -- Federal Reserve Bank of St. Louis President James Bullard urged policy makers to think twice before deciding on further large-scale purchases of securities because they could bring the threat of higher inflation.

“Outright asset purchases are a potent tool and must be employed carefully,” Bullard said in the text of a speech today in St. Louis. “Increases in the size of the balance sheet entail additional inflationary risks if accommodation is not removed at an appropriate pace.”

Federal Reserve policy makers are considering additional stimulus even as the economy picks up. Fed Chairman Ben S. Bernanke on Nov. 2 said unemployment is still “far too high” and additional stimulus “remains on the table.”

Bullard told the CFA Society of St. Louis that the U.S. economy has avoided the “recession scare” of August while the European debt crisis remain a risk.

Data on the U.S. economy “continues to show moderate growth,” Bullard said. While events in Europe are “unpredictable, he said, the union’s leaders “tend to be very supportive of keeping the ‘European Project’ of ever-greater European integration moving forward.”

--Editors: Christopher Wellisz

To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net


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