Friday, June 21, 2013

Bullard Blasts Bernanke & Co.
James Bullard (FRB-SL) serves as a voting member of the FOMC this year. He was one of the two dissenters at the latest meeting of the FOMC on June 18-19. According to the FOMC statement released on June 19, he “believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings.” Today, in a news release, he scathingly criticizes the decisions taken at the latest meeting:
In his view, the Committee should have more strongly signaled its willingness to defend its inflation target of 2 percent in light of recent low inflation readings. Inflation in the U.S. has surprised on the downside during 2013. Measured as the percent change from one year earlier, the personal consumption expenditures (PCE) headline inflation rate is running below 1 percent, and the PCE core inflation rate is close to 1 percent. President Bullard believes that to maintain credibility, the Committee must defend its inflation target when inflation is below target as well as when it is above target.
He then questions the committee’s judgment in explicitly specifying the Fed’s exit strategy from QE:
President Bullard also felt that the Committee’s decision to authorize the Chairman to lay out a more elaborate plan for reducing the pace of asset purchases was inappropriately timed. The Committee was, through the Summary of Economic Projections process, marking down its assessment of both real GDP growth and inflation for 2013, and yet simultaneously announcing that less accommodative policy may be in store. President Bullard felt that a more prudent approach would be to wait for more tangible signs that the economy was strengthening and that inflation was on a path to return toward target before making such an announcement.
He strongly objects to “the Committee’s decision to authorize the Chairman to make an announcement of an approximate timeline for reducing” QE. In his opinion: “Policy actions should be undertaken to meet policy objectives, not calendar objectives.”

He didn’t resign in protest, but rather “he does feel that the Committee can conduct an appropriate and effective monetary policy going forward, and he looks forward to working with his colleagues to achieve this outcome.”

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