Newspaper article International Herald Tribune

In Europe, Fed Official Urges Bolder Moves ; Economic Stasis a Risk without Quantitative Easing Policy, He Warns

Newspaper article International Herald Tribune

In Europe, Fed Official Urges Bolder Moves ; Economic Stasis a Risk without Quantitative Easing Policy, He Warns

Article excerpt

James Bullard, a member of the Federal Reserve's policy committee, warned Europe of becoming trapped in the economic stasis from which Japan is only now emerging.

A top official of the Federal Reserve has urged the European Central Bank to take more aggressive action to restart growth, warning that the euro area risked becoming mired in the same kind of economic stagnation that has plagued Japan for two decades, with far- reaching implications for the global economy.

James Bullard, president of the Federal Reserve Bank of St. Louis, Missouri, and a voting member of the Fed's policy-setting open markets committee, said Tuesday that Europe's central bank should consider quantitative easing similar to that undertaken by the Fed -- large bond purchases meant to drive down market interest rates.

The public comments were highly unusual.

While central bankers from different countries frequently confer in private and offer advice and criticism to their peers behind closed doors, it is rare for any official to go public with even the mildest criticism of another central bank.

But with official interest rates in almost every advanced economy already close to zero, Mr. Bullard said, central bankers must reach for stronger tools to avoid getting trapped in economic doldrums.

"The lesson of Japan is that once you get stuck, it's very hard to get out," Mr. Bullard told an audience at Goethe University in Frankfurt. "One way to get stuck would be not to take aggressive action."

Mr. Bullard sent a message to Wall Street not to expect the Fed to begin rolling back its own quantitative easing program soon, saying that there was no sign of inflation risk, and that even if there were, the central bank could deal with it.

"We just haven't seen it so far," Mr. Bullard said of inflation. And when it starts to appear, he added, "we know how to fight that problem -- we can raise rates."

Mr. Bullard spoke ahead of meetings in Frankfurt with some of his European counterparts, including Mario Draghi, the president of the European Central Bank. …

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