Bloomberg News

Bullard Says Fed Should Focus Debate on Balance Sheet

April 16, 2012

Federal Reserve Bank of St. Louis President James Bullard said the Fed’s policy debate should focus on the size of its $2.87 trillion balance sheet and not on when to move its main interest rate from close to zero.

“Heavy focus on the nature of the Fed’s interest rate reaction function in the current environment is questionable,” Bullard said today in a speech in Logan, Utah. “There are many issues at least as important,” he said, adding most monetary policy is not currently about interest rate adjustment. So- called “unconventional” policy, such as asset purchases known as quantitative easing, has become more important, he said.

Policy makers are holding off on increasing monetary accommodation unless the economic expansion falters or prices rise at a rate slower than their 2 percent target, according to minutes of the March 13 meeting. Bullard is the last Fed official scheduled to speak publicly before Chairman Ben S. Bernanke and his colleagues meet to update policy April 24-25.

The Fed’s approach wouldn’t change much if the central bank was mandated to focus only on price stability, rather than also seek to achieve maximum employment, Bullard said at the Jon M. Huntsman School of Business at Utah State University.

“In practice, monetary policy is viewed in the same way in Europe as it is in the U.S., despite the differing mandates,” he said. “Achieving the single mandate is still consistent with the maximum level of employment of households.”

Bullard didn’t comment on the U.S. economic outlook in his prepared remarks.

Bullard, who doesn’t vote on monetary policy this year, was the first Fed official in 2010 to call for a second round of asset purchases by the central bank. The Fed pushed down its target interest rate close to zero in December 2008 and has engaged in two rounds of asset purchases totaling $2.3 trillion to boost the economy.

Bullard, 51, joined the St. Louis Fed’s research department in 1990 and became president of the regional bank in 2008. His district includes Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.

To contact the reporters on this story: Steve Matthews in Atlanta at;

To contact the editor responsible for this story: Christopher Wellisz in Washington at

Toyota's Hydrogen Man
blog comments powered by Disqus