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Monday, October 12, 2009

Fed's Bullard: Falling Unemployment Rate "Prerequisite" for Rate Increase

by Calculated Risk on 10/12/2009 10:07:00 PM

Usually this would be a "duh", but with some of the Fed talk recently, this is worth noting ...

From Bloomberg: Bullard Says Lower Unemployment Condition to Tighten

...“You want some jobs growth and unemployment coming down. That is a prerequisite” for an increase in interest rates, Bullard said. “It doesn’t mean you need unemployment all the way down to more normal levels.”
Bullard, referring to a prior jobless rate of 10.8 percent, said “I don’t think we will quite hit the peak we hit in 1982, but things have surprised us before.”
“I’m the north pole of inflation hawks,” Bullard said. “But we are trying to describe optimal policy, some optimal outcomes in an environment where inflation is below target -- we have an implicit target of 1.5 to 2 percent -- and you have the specter of a Japanese-style outcome, which I have worried about and some other members of the FOMC have worried about.”
“It is a little disappointing that private-sector economists are thinking so much about when we are going to move our fed funds rate up,” he said. “We are at zero. We are going to be there awhile. The focus should be more on” the Fed’s asset purchase program.
As Paul Krugman noted this weekend, we are a long way from when the Fed will raise rates.