Salient to Investors:

James Bullard at FRB of St. Louis  said:

  • The Fed may need to increase monthly asset purchases above the current $85 billion pace if inflation slows further below its 2 percent goal.
  • The FOMC should signal more strongly its willingness to defend its inflation goal.
  • The Fed inappropriately timed a plan to start trimming bond purchases later this year, and should have waited for signs the economy is strengthening and inflation is picking up.
  • 44 percent of economists expect the Fed to cut bond buying by $20 billion at the Sept. 17-18 policy meeting.
  • Fed forecasts show inflation won’t return to target until 2015 or later,and commodities prices have moved lower on reduced worldwide demand.
  • Europe is in recession, China has been slower than expected, so identifying what will cause prices to move higher as the FOMC expects is a great question.
  • Rising US Treasury yields partly reflect signs of stronger growth, partly investors’ expectations of a sooner-than-expected tapering, while rising real rates could slow economic growth.
  • The FOMC is too focused on unemployment, which is largely affected by elements outside of its control and has fallen faster than the Fed expected.
  • 2013 growth will be 2.6 percent, and the jobless rate will fall to 7.1 percent at year-end.
  • The potential for asset price bubbles is a concern though there is not enough tangible evidence for that to sway policy now.
  • We are at the point where further declines in inflation would start to really raise the possibility that we have some deflation.

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