St. Louis Federal Reserve Bank President James Bullard said a hike in U.S. interest rates may be "quite a ways away," Market News International reported on Tuesday.
"I think it's a ways away -- maybe quite a ways away," Market News reported Bullard as saying in an interview.
Bullard said the Fed's pledge to keep benchmark overnight rates exceptionally low for an extended period was meant to give the economy "some additional impetus," MNSI said.
However, Bullard said that the U.S. central bank would bear in mind the lessons of the prolonged episode of low Fed rates in 2003 and 2004 and try to avoid over-stimulating the economy in a way that leads to inflation.
"I think there will be far more consciousness of that than there was in 2003 and 2004," he said.
Bullard saw "no reason why we can't run a monetary policy that gets it just right, that allows the economy to recover without inflation." But he acknowledged that the Fed will need to "make good judgments and get the timing right," MNSI said.
The Fed has cut interest rates to almost zero and pumped over $1 trillion into credit markets to prevent them freezing in panic amid a global financial crisis last September, after the failure of investment bank Lehman Brothers.
Some fear this doubling of the U.S. monetary base will buoy the money supply and increases inflation by the same scale once banks regain confidence and ramp up lending, in the county's next credit-fueled spending bubble. The monetary base measures notes and coins in circulation, and commercial bank reserves held with the central bank,
Bullard said this did not necessarily follow, provided the Fed exits from its easing strategies when the time is right.
"If you put a lot of monetary base out there today, and we take it all back tomorrow, we normally don't think that's very inflationary; it really almost has no impact at all," he said.
"So the question is, if you put all this monetary base out there and you leave it out there and it eventually gets into the money supply and people see that you don't have any intention of bring it back, that can lead to an eventual doubling of the price level," he told MNSI.
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