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Fed policies effective but 'room for debate,' Bullard says

[March 27, 2014]  HONG KONG (Reuters) — The Federal Reserve's unconventional monetary policies are effective, a top U.S. central banker said on Thursday, even as he nodded to the possibility they may be suboptimal and therefore contributing to unnecessary global volatility.

Emerging markets swooned last summer after then-Fed Chairman Ben Bernanke suggested he could begin to reduce the Fed's extraordinarily easy monetary policies by tapering its massive bond-buying program later in the year.

If Fed policies are indeed effective, that so-called taper tantrum was "merely the global macroeconomic equilibrium in action," St. Louis Federal Reserve President James Bullard said in slides prepared as part of a presentation to an investment conference in Hong Kong.

He said he subscribed to that view himself.

Such global volatility, he explained, is a side effect of each central bank pursuing the best possible policy for its own country, and there is little to be gained by international policy coordination.

But an alternative view, he said, holds that current U.S. monetary policies are not as effective as conventional policies and therefore can lead to more global volatility.

"I think unconventional U.S. monetary policy has been sufficiently aggressive" to be effective, Bullard said in the slides.

"However, I admit that there is plenty of room for debate on this issue."

(Reporting by Michael Flaherty; writing by Ann Saphir; editing by Lisa Shumaker)

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