FARMINGTON, Missouri) - whirlpool on the problems of sovereign debt in Europe could weigh on economic recovery to the United States, Chairman of Federal Reserve St. Louis James Bullard said Monday.
"I am concerned by the situation in Europe," Bullard said to reporters after a speech. "Prolonged disruption of financial markets could be a negative for the United States."
Financial markets piled pressure on the country highly indebted euro area Monday and the stock markets fell as investors worried about the risks increased in Spain and the Greece and fed rating agencies new concerns on the Italy and the Belgium.
In Italy, which has greater debt in the eurozone in absolute terms on piles, was affected by the decision of the credit agency Standard & Poor Saturday ratings to cut its Outlook to "negative" from "stable".
Uncertainty in Europe is one of the reasons why the U.S. long-term bond yields have fallen, Bullard said, investors move into less risky.
Discuss monetary policy, Bullard said to wait for the action for some time after the Federal Reserve ends its bond of $ 600 billion purchase of program in June.
"Past (the Fed) behaviour indicates that the Committee sometimes involves policy pending," he said at the mineral area College Foundation. "A pause allows more time to assess the strength of the economy."
Waiting to see how the evolution of the economy, the Fed would hold interest rates near zero, said Bullard, who is not an elector on the policy of the Central Bank setting Panel this year.
Keep it also signals no change to the promise of the Fed to keep rates low for an extended period, said.
In addition, this means the reinvestment of securities in order to maintain the very extensive balance sheet of the Fed at some level it reaches after the bond-purchasing initiative draws to a close, probably over $ 2.7 billion, he added.
He said that if the economic recovery gains pace in the second half of the year, it would be reasonable to expect that the next phase of the Fed would tighten financial conditions. However, he said that us growth in the first half of 2011 has been slower than expected.
House in the United States sales and activity data factory was published last week showed the economy was stuck in low gear, although a decrease in requests for assistance without employment offered hope that the labour market recovery was on track.
Bullard has also warned that fresh energy and food, and the measures of inflation stripping can minimize inflation. Fed officials have argued that despite the recent price of raw materials and food breaks, inflation has failed because the underlying measures rose only modestly rates historically low.
Prices of raw materials have connected "dramatic" increases in recent months, he said.
"Ignoring the price of energy in a price index can systematically underestimate inflation for many years,", he added.
Many of the Fed officials believe that the best way to measure if their efforts to keep inflation at Bay work is to look at the measures of underlying inflation, because it is a better gauge where inflation is directed.
Bullard has further renewed its call for the Fed to adopt an explicit numerical inflation target.
Fed Chairman Ben Bernanke reported after the last meeting of the Fed at the end of April that the US Central Bank is fed officials pressed to reverse his massive support in the modest economic recovery in United States where the unemployment rate remains above that think is standard. This support includes interest rates low benchmark and will be the amount of 2.3 trillion in purchases of assets in the long term when the current program will eventually.
Many economists and some Fed officials are worried that inflation risk is growing. Even though oil prices have moderated recently, there is concern that the Fed is ignoring the overall inflation because the price of gas and many food products are substantially higher many consumers.
Fed officials such as Bernanke argued that higher energy prices reflect an increase in global demand for emerging markets such as China, India and Brazil, not too easy monetary policy to the United States. The President and others also say that there is no indication or business consumers expect inflation in the future.
However, Bullard said recent events show the so-called inflation as food strips volatile and prices of energy is not an accurate gauge of trends and raises doubts in the minds of the public on the effectiveness of the Fed.
Again, Bullard has told reporters he believes that the Fed would be in no rush to tighten policy if it focused on overall inflation rather than underlying inflation. The main problem with the emphasis on core inflation is that it makes the Fed disconnected from the price of most consumers are experiencing, he said.
"It's poorly Fed credibility to talk about core inflation when everyone sees global inflation", said Bullard.
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