St. Louis Federal Reserve President James Bullard said Monday that the U.S. economic recovery is not strong enough to warrant an increase in the Fed's accommodative policy rate.
Speaking to reporters after a speech at the Institute of Regulation and Risk North Asia in Japan, Bullard said the Fed would need to see more improvement before raising the rate.
"The recovery will have to be firmer than it is right now and we'll have to see more improvement," he said, according to the Wall Street Journal.
Bullard also added that the financial turbulence brought on by the sovereign debt crisis in Europe makes it unnecessary to raise the Fed's discount rate at this time.
Bullard did say however, that the macroeconomic recovery in the U.S is on track and that the country's recovery in GDP should be complete by the third quarter of this year.
Turning to the global recovery, Bullard said that Asia is leading a strong and powerful recovery, and added that concerns about an economic "bubble" in China derailing the global recovery - despite falling stock prices in the country - may be unfounded.
"The more sensible interpretation of China is the one that has held sway for many years: It is a rapidly developing economy that is importing available production technology from the rest of the world, and creating its own as well, in a manner that leads to substantial gains in productivity, national income, and the national standard of living," he said in prepared remarks.
Bullard added that China "simply returned to its rapid growth path and is likely to remain on that path for a considerable period of time."
The St. Louis chief did say, however that Europe's debt crisis will continue to cause market concerns in Europe for months, or even years.
"Confidence lost in such markets is difficult to regain, and for this reason I think we can expect market concerns to remain for months, possibly years, rather than just days or weeks," he said. "Governments must take aggressive action to earn credibility, and then sustain that effort over a long period of time."
Bullard concluded his speech by adding that the thought it was time to consider fiscal consolidation in the U.S. so that future prospects for recovery are not hampered.
"Now that the U.S. economy is about to achieve recovery in GDP terms, it is time for fiscal consolidation in the U.S.," he said. "Irresponsibly high deficit and debt levels are not helping the U.S. economy and could damage future prospects through a loss of credibility internationally. A substantial and credible fiscal adjustment could set up the U.S. for a sustained period of growth, as it did in the 1990s."
by RTT Staff Writer
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