Emerging Consensus On QE2 Tapering In The Not-Overly-Distant Future Be Damned

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Are you among the legions of pundits, Republican congressmen and Dallas Fed presidents who think it is well past high time for the Fed to stop buying so many bonds? Did you think, with last week's better-than-expected jobs report and Fed doves running scared left and right, that the tide had finally turned? That at last there would be a beginning of the end to this dreadful program, as soon as next week?

Think again, because St. Louis Fed President James Bullard is making the case that quantitative easing could and possibly should go on for very close to forever. And unlike the increasingly unhinged Richard Fisher, he's got a vote at the next couple of FOMC meetings.

Weak inflation readings may mean the Federal Reserve will have to press forward with its current bond buying stimulus effort for longer than was once expected, a U.S. central bank official said Monday….

“Labor market conditions have improved since last summer, suggesting the committee could slow the pace of purchases, but surprisingly low inflation readings may mean the committee can maintain its aggressive program over a longer time frame,” Mr. Bullard said in a press release that accompanied materials associated with his speech….

Mr. Bullard noted in his prepared remarks that commodity prices, a key driver of inflation, have been “soft” over the last year. He said that may be due to Europe’s recession and weaker than expected Chinese growth. But he also noted that price pressures stripped of food and energy are also low, which means the current state of inflation “may give the FOMC more leeway to continue its aggressive asset purchase program.”

Fed's Bullard: Weak Inflation May Argue For More Stimulus [WSJ Real Time Economics blog]

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