-Federal Reserve Bank of St. Louis President James Bullard
The weak inflation pressure is adding to the case of the Federal Reserve maintaining the pace of its stimulus programme, Federal Reserve Bank of St. Louis President James Bullard said Monday. Even despite some improvement in the labour market, inflation remains well below the Fed's 2% target, warranting prolonged the aggressive use of bond-buying in order to boost growth and bring down unemployment. Consumer prices rose only 0.7% for the year ending April, and Bullard already voted this year in favour of maintaining stimulus. On May 1, the Fed said it will continue buying bonds until it sees a sustainable improvement in the labour market, and the last week's report showed that payrolls surged 175,000 in May, while the unemployment rate climbed to 7.6%.
Bullard also expressed his concerns over the core inflation, which excludes food and energy prices, suggesting it can remain low. Positive data from the labour market are raising speculation the Fed should slow the pace of purchases, but surprisingly low inflation reading mean the Committee is likely to maintain its aggressive programme over a longer time frame. He suggests the Fed should engage in open-ended bond purchases without setting a goal or ending data, as this approach has been adopted in the latest round of purchases, proving its effectiveness.
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