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Fed’s Bullard Says Time Is Right to Pull Back On Stimulus - WSJ

EconomyJul 13, 2021 05:53AM ET
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© Reuters.

By Dhirendra Tripathi

The Federal Reserve should immediately start to cut back its bond buying, The Wall Street Journal reported Federal Reserve Bank of St. Louis President James Bullard as saying in an interview published on Tuesday.

“I think with the economy growing at 7% and the pandemic coming under better and better control, I think the time is right to pull back emergency measures,” Bullard told the WSJ.

Bullard’s comments are striking on two counts -- firstly, they come from someone who previously had a reputation as one of the more dovish members on the Federal Open Market Committee; secondly, they stand in stark contrast to warnings from other FOMC members about the dangers of withdrawing stimulus too soon. 

New York Fed President John Williams, repeating comments he has made previously, said on Monday the U.S. economy has not yet achieved the "substantial further progress" threshold officials set for reducing the central bank's asset purchases, while San Francisco Fed President Mary Daly warned on Friday that a 'premature' withdrawal of stimulus would be a big risk, given the continued spread of new strains of the Covid-19 virus. 

While the U.S. has vaccinated more than half its population with at least one dose, the pace has slowed sharply since May. Vaccine hesitancy is now widely seen as a big obstacle to reaching herd immunity. Experts are now debating on the need for a booster dose of the vaccines.

In his interview, Bullard voiced especial concern about the state of the housing market, where low mortgages rates and other structural factors are causing steep rises in prices. The S&P/Case-Shiller House Price Index, a leading indicator of home prices in the U.S., indicated that they rose 14.9% year-on-year in April, the most since 2005, during the subprime mortgage boom.

“I am a little bit concerned that we’re feeding into an incipient housing bubble,” he said. “We did get into a lot of trouble with a housing bubble in the mid-2000s and it—and it caused a lot of damage to the economy, so I don’t think we need to be feeding that here given the situation.”

Of the Fed’s $120 billion a month purchases, $80 billion go to the U.S. Treasury market, while the rest go in buying mortgage bonds.

“What we found out from that era was that housing prices can fall nationally and it does have big consequences for the macroeconomy,” Mr. Bullard added, noting that when it comes to the housing market, “we don’t need to, you know, push that any harder than it’s already being pushed by markets.”

Bullard's comments came only hours before the publication of U.S. inflation figures for June. According to estimates, the consumer price index is expected to have risen at an annual rate of 4.9%, a trifle lower than May’s 5%.

 

Fed’s Bullard Says Time Is Right to Pull Back On Stimulus - WSJ
 

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Comments (11)
Kaveh Sun
Kaveh Sun Jul 13, 2021 10:18AM ET
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He is not a voting member this year. Who cares what he is saying this year.
Jouni Matero
Jouni Jul 13, 2021 10:18AM ET
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All should, he's the only voice of sense.
Methouch Chongvilaigasame
Methouch Chongvilaigasame Jul 13, 2021 9:53AM ET
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move your money to china
Picaso Fish
Picaso_Fish Jul 13, 2021 9:27AM ET
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I am not 100% convinced, the fed will never taper. Meaning, an reduction or pause in buying tbills and mortgage backed securities.
Jouni Matero
Jouni Jul 13, 2021 9:27AM ET
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They do nothing.
Gurinder Sira
Gurinder Sira Jul 13, 2021 9:10AM ET
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Good one they should stop feeding the monistor
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jul 13, 2021 8:47AM ET
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All talk. There will never be a pull back.
Semih Unalan
Semih Unalan Jul 13, 2021 8:41AM ET
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Traitor. He should be sacked asap.
Andrew Allen
Andrew Allen Jul 13, 2021 8:41AM ET
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you are a communist and an enemy of the American people
Picaso Fish
Picaso_Fish Jul 13, 2021 8:41AM ET
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lolz, sounds Trumpian. If we slow down the stimulus the markets won't go straight up forever!!
Jeff Paper
Jeff Paper Jul 13, 2021 8:41AM ET
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Sacked? He should be promoted for being the only one with common sense.
Jouni Matero
Jouni Jul 13, 2021 8:41AM ET
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You are an absolute donk!
jason xx
jason xx Jul 13, 2021 7:10AM ET
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Real estate prices are getting ridiculous
Roger Pruzansky
Roger Pruzansky Jul 13, 2021 6:37AM ET
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the fed is not about to stop anytime soon. they will continue to buy even more then before as they want to buy the world.
Michael Dell
Michael Dell Jul 13, 2021 6:26AM ET
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Only Powell matters who cares about this guy
Josh Modern
JoshModern Jul 13, 2021 6:26AM ET
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his mother?
George Cleancut
George Cleancut Jul 13, 2021 6:26AM ET
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anything moves the market now n days. Someone break a toe nail. CNN, NBC and World News says.ita because of the Delta Variant . Whole market goes banana
woomwoom woomwoom
woomwoom woomwoom Jul 13, 2021 6:11AM ET
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i wouldn't want that selloff or correction starts on markets.
Jouni Matero
Jouni Jul 13, 2021 6:03AM ET
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Sound of common sense. About time.
 
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