The president of the Federal Reserve Bank of St. Louis criticized his Fed colleagues for tightening monetary conditions earlier in the week, saying that the central bank risked inflation falling too low.
James Bullard, the president of the St. Louis Fed since 2008, issued a press release on the regional bank’s website Friday morning explaining his dissent from the Federal Open Market Committee’s June monetary policy decision. Bullard noted that inflation is currently running well below the Fed’s preferred rate of 2 percent, with personal consumption expenditures inflation, the rate the Fed watches more closely, below 1 percent.
Although Bullard’s comments stand as an implicit rebuke to Fed Chairman Ben Bernanke and other members of the Federal Open Market Committee that makes decisions about the money supply, Bullard is not generally considered an inflation “dove.” In the past, he has called for Fed stimulus to vary with the state of the economy, but is not known for favoring a higher inflation target.
Bullard’s statement also strongly suggests that Bernanke and other members of the Fed knew and intended that their Wednesday announcement would be received as monetary tightening. Bullard’s release characterized the decisions as “announcing that less accommodative policy may be in store.”
During his press conference following Wednesday’s decision, Bernanke insisted to the press that the Fed would not withdraw stimulus until the economy improves, but Bullard’s comments suggest that the meeting’s participants saw things differently.
The Federal Open Market Committee is made up of 12 members, five of whom, like Bullard, are presidents of regional banks. One other member of the voting committee, Esther George of the Kansas City Fed, dissented from the Wednesday decisions. George, however, voted no because she worried that inflation would eventually rise out of control, not because it was too low.
Bullard became a voting member of the FOMC this year, and will rotate out of the committee next year.