Fed will start tapering when job market shows continuous improvements: Bullard
PHILADELPHIA—Federal Reserve Bank of St. Louis President James Bullard said the central bank will start cutting back on its easy money policies if the job market continues to improve, but he gave no hint of when that might be.
Mr. Bullard, speaking Friday in St. Louis, said the labor market has improved in the year since the Fed launched a controversial $85 billion-per-month bond-buying program aimed at boosting economic growth. But the Fed’s policy meeting Wednesday “didn’t seem to be the right juncture to pull back,” he told reporters after the speech.
Investors around the world have been on edge since the spring waiting to learn when the Fed will start winding down the bond-buying program, which has helped buoy stock and bond prices. Fed officials surprised the market by not reducing, or “tapering,” the purchases at their September meeting. They decided again at their meeting Wednesday to press ahead with the program unchanged, saying they would “await more evidence that progress will be sustained” before trimming their bond buys.
The Fed has said it would continue the bond buying until the labor market has improved “substantially.” Mr. Bullard, the first Fed official to speak publicly since the Wednesday meeting, stressed Friday he is looking for cumulative gains in deciding when to move. The unemployment rate has dropped to 7.2% in September from 7.8% a year earlier when the program began, but part of that decline is due to people who have stopped looking for work and so aren’t counted as unemployed.
“To the extent that key labor market indicators continue to show cumulative improvement, the likelihood of tapering asset purchases will continue to rise,” Mr. Bullard said. But, he said, the Fed also “wants reassurance that any progress made in labor markets will stick.”
Mr. Bullard has been a strong supporter of the bond-buying program, which seeks to lower long-term interest rates in an effort to spur spending, investment and hiring.
