Fed less likely to trim QE this month due to fiscal problems: Bullard

By Jonathan Spicer

ST. LOUIS (Reuters) - A reduction in the Federal Reserve's bond-buying program is less likely to take place later this month given the U.S. government shutdown and resulting lack of economic data, as well as the ongoing debate over the debt ceiling, a top central bank policymaker said on Thursday.

St. Louis Fed President James Bullard, a voter on policy this year, said the fiscal problems in Washington have "changed the odds" on whether the central bank will trim the monthly $85-billion quantitative easing program at a meeting set for October 29-30.

Bullard supported the shock decision last month not to trim the current $85-billion monthly pace of bond purchases, which are meant to spur investment, hiring and growth. Markets at the time reacted sharply to the decision, with stocks soaring globally, but now the move seems prescient given this month's fiscal gridlock in Washington.

Last month "we cited that fiscal uncertainty was a risk and that risk has materialized, so I think that's making it less likely than would otherwise be that we make a decision to taper in October," Bullard told reporters on the sidelines of a conference hosted by his Fed bank, adding the debt-ceiling debate also plays a big role.

Still he said he has not made up his mind and didn't want to pre-judge the October meeting. "But it has changed the odds," he added.

Budget gridlock at the U.S. Congress led to an October 1 government shutdown that threatens to hurt economic growth and has already delayed key economic data such as the September jobs report. Lawmakers are now locked in debate over when and how to avoid a government default raise on October 17.

Bullard is usually seen as a policy centrist, but has become one of the central bank's most vocal doves due to concern that inflation remains too far beneath the Fed's goal of 2 percent, which he worries could lead to damaging deflation.

(Reporting by Jonathan Spicer; Editing by Chizu Nomiyama)

Source: http://news.yahoo.com/fed-less-likely-trim-qe-month-due-fiscal-164159842--business.html
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