"The idea that the Fed should ‘put more weight' on unemployment does not fare well"
- James Bullard, president of the Federal Reserve Bank of St. Louis
The unemployment rate in the world's largest economy is expected to fall to 7.0% level by the end of this year, James Bullard, president of the Federal Reserve Bank of St. Louis said Wednesday. Since the end of the last recession, the unemployment rate has been declining at about 0.7 percentage point per year. Bullard also noticed that the Fed should first of all focus on its price-stability even despite record high unemployment, and that the importance of labour market is exaggerated. During last policy meeting, the Fed decided to continue to buy $85 billion in bonds every month, while interest rates will remain near zero as long as unemployment is above 6.5% and inflation does not exceed 2.5%. Latest report showed that in March the overall jobless rate stood at 7.6%.
"The idea that the Fed should ‘put more weight' on unemployment does not fare well," Bullard said in a speech in New York. "Such an approach may be highly counterproductive. At this pace, the unemployment rate will be in the low 7 per cent range by the end of 2013."
"The essential finding is that monetary policy alone cannot effectively address multiple labor market inefficiencies, and so one must turn to more direct labor market policies to address those problems," Bullard said.
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