The officials, from opposite sides of the U.S. central bank's
spectrum of policymakers, reinforced public perceptions that it
would take a more significant slowdown in the labor market to
convince the Fed to stop withdrawing stimulus.
In what amounted to the beginning of the end of the largest monetary
policy experiment ever, the Fed last month decided to cut its
bond-buying by $10 billion to $75 billion each month, citing
progress in the labor market.
Earlier on Friday, a report showed U.S. joblessness fell to 6.7
percent from 7 percent in November. But hiring was far lower than
expected, leaving many second-guessing just how strong is the labor
market recovery that took hold in the autumn.
"I would be disinclined to react to one month's number," St. Louis
Fed President James Bullard told reporters after speaking at an
Indiana bankers event. "For now we're on a program where we're
likely to continue to taper (asset purchases) at subsequent
Bullard, who last month backed the cut to the so-called quantitative
easing program, said he was more focused on the drop in unemployment
than on the paltry 74,000 jobs that were created, a number he
expects to be revised higher.
Jeffrey Lacker, the hawkish head of the Richmond Fed, said it would
take a "couple of quarters" of bad news to change the U.S. economy's
"It takes a lot more than one labor market report to be convincing
that the trend has shifted and in my experience one employment
report rarely has an effect by itself on monetary policy," said
Lacker, who has been an opponent of bond buying from its start.
"I would expect a similar reduction in pace to be discussed at the
upcoming meeting," Lacker told reporters after a speech to a
business group in Raleigh.
The Fed's next meeting is on January 28-29, Bernanke's last as
chairman before he is succeeded by Vice Chair Janet Yellen.
Clarifying future Fed policy a bit more, U.S. President Barack Obama
on Friday nominated former Bank of Israel governor Stanley Fischer
to replace Yellen. He also nominated former top Treasury official
Lael Brainard to fill a vacancy at the Fed Board, and renominated
Governor Jerome Powell.
Neither Bullard nor Lacker have votes on policy this year under the
Fed's rotating system.
[to top of second column]
INFLATION "WILD CARD"
To recover from the recession, the Fed has held benchmark interest
rates near zero since late 2008 to spur growth and hiring. It also
has quadrupled the size of its balance sheet to around $4 trillion
through three rounds of massive bond purchases aimed at holding down
longer-term borrowing costs.
The Fed tempered the December 18 cut to bond-buying by suggesting
its key interest rate would stay at rock bottom even longer than
previously promised. It will now likely wait until well after the
U.S. unemployment rate falls below 6.5 percent before it tightens
policy, instead of simply waiting at least until that threshold was
Asked whether the Fed might be forced to lower that 6.5 percent
threshold, given the sharp drop in joblessness, Bullard said it was
unlikely in part because such a move could compromise the
credibility of the policy promise.
For now, polls show most economists expect the Fed to trim its
monthly bond-buying by about $10 billion at each meeting.
Until the dour December jobs report, growth in consumer spending,
housing and manufacturing, as well as a congressional budget deal
struck last month, suggested the U.S. economy was stepping up its
slow recovery from recession.
However the big "wild card" for Fed policy this year remains
persistently low inflation, Bullard said.
"For now we're on a program where we're likely to continue to taper
at subsequent meetings ... But it is data dependent. If inflation
stepped lower in a clear way then I think that would give me some
pause" in continuing the cuts, he said.
The Fed targets 2 percent inflation.
Lacker said he was confident inflation would move back toward that
goal in the next year or two but added: "This is not a certainty,
however, and I believe the FOMC will want to watch this closely,"
referring to the policy-setting Federal Open Market Committee.
(Reporting by Jonathan Spicer; editing
by James Dalgleish)
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