Bullard Says Fed Bond Purchases Not Needed as U.S. Unemployment Rate Falls

A new round of Federal Reserve bond purchases isn’t warranted because the U.S. job market and broader economy are strengthening faster than expected, according to St. Louis Fed President James Bullard.

“The economic news and economic data, including today’s data, has been surprising to the upside,” Bullard said yesterday, referring to employment gains. “I need to see significant deterioration in the economy and some threat of deflation or inflation moving significantly below our inflation target before” backing more bond buying by the Fed, he said in a Bloomberg News interview.

Chairman Ben S. Bernanke said on Jan. 25 the central bank is considering purchasing more bonds to reduce borrowing costs and spur growth. Two days later, New York Fed President William C. Dudley said the economy will probably slow this year due to “significant impediments,” and that the central bank “will continue to do its part in supporting the recovery.”

Chicago Fed President Charles Evans said on Feb. 2 that economists have suggested asset purchases of around $1 trillion, and he may favor a Fed program “more ambitious than most numbers being bandied about.”

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. Unlike then, the U.S. isn’t at risk of a broad decline in prices similar to what beset Japan, he said.

“Inflation is coming down, but at least for now it is above our inflation target” of 2 percent, Bullard said. “We will see how things develop. But I am also more bullish on the economy as a whole. I do think we have momentum coming out of 2011.”