In a sign of increasing Fed confidence that the U.S. economy has avoided a possible “double-dip,” James Bullard, president of the Federal Reserve Bank of St. Louis, said current central bank policy is “appropriately easy” and another recession is unlikely.
“We probably avoided this recession scare that we’ve been having since August,” Bullard said Wednesday in a radio interview on “Bloomberg Surveillance” with Tom Keene. Recent economic reports have “surprised on the upside,” he said, according to the transcript.
Additional asset purchases are the central bank’s “most potent” weapon, he said, while adding he wouldn’t support more bond buying. “I think policy is already appropriately easy, so I don’t think we’re in any position to do that now,” he said.
“I think we’ll get away now without a recession,” Bullard said, saying he expected growth of 2% to 2.5% in the second half of this year. “It’s not great but it’s better than what people were expecting during the summer.”
The news service says Bullard attributed the sluggish growth to the aftermath of the housing bubble and noted that investment in the economy has not recovered to pre-recession levels.
“We got the upside of the bubble during 2004, 2005, 2006 when everything was going so well. Now we’ve got the downside of the bubble in 2011 and 2012.”
Bullard told Bloomberg he supports Operation Twist, although its impact on the economy is likely to be limited. He doesn’t vote on the Federal Open Market Committee this year.
“There’s some analysis inside the Fed that suggested this would have some impact so we’ll go ahead with it,” Bullard said.
As Bloomberg notes, Bullard “opposed the Fed’s pledge, made in August and maintained this month, to hold its benchmark interest rate near zero at least through the middle of 2013 so long as unemployment stays high and the inflation outlook is ‘subdued.’
“You should make policy according to the state of the economy, not according to the calendar,” Bullard said. “It’s very awkward for the committee to be trying to move that date around.”