Federal Reserve Bank of St. Louis President James Bullard said signs of more stability in U.S. fiscal policy, the housing market and the global economy will probably help fuel economic growth in 2013.
“This year seems to be characterized by less macroeconomic uncertainty compared to previous years,” Bullard said today in a speech in Jonesboro, Ark. “This bodes well for U.S. macroeconomic prospects in 2013.”
Bullard backed the Federal Open Market Committee decision last month to continue buying bonds at a rate of $85 billion a month after gross domestic product fell 0.1% in the fourth quarter. Policy makers have pushed the benchmark interest rate close to zero and expanded Fed assets to a record exceeding $3 trillion to fuel growth and reduce 7.9% unemployment.
“Housing markets appear to be more robust” compared with a year ago, when a continued decline in housing prices seemed possible, Bullard said at Arkansas State University’s agribusiness conference.
The U.S. elections late last year cleared up some “uncertainty,” with fiscal concerns “partially resolved,” he said. Also, the European Central Bank’s commitment to stimulate regional growth has improved Europe’s outlook.
“While 2012 was marked by a clear downshift in Euro-area economic growth, 2013 will likely see either a stabilization or some recovery in Euro-area growth,” he said. “In this sense the uncertainty concerning the European outlook has been reduced.”
“Emerging-market economies slowed during 2012, in part due to the European recession, but these economies are now expected to fare better in 2013,” Bullard said. China’s economic growth recently has been “stronger,” he said.
U.S. economic weakness from last quarter persisted into January. Consumption slowed last month, with retail sales rising 0.1% after a 0.5% increase in December, hurt by higher payroll taxes, Commerce Department figures showed today.
Fed policy makers expect growth of 2.3% to 3% this year, according to forecasts made in December. Bullard, among the most optimistic on the Fed, has predicted that growth may accelerate to about 3% or more.
The central bank in September
Record low interest rates may be prompting excessive risk taking, Fed governor Jeremy Stein said last week at a conference hosted by Bullard’s bank. Central bank officials, including Kansas City Fed President Esther George, have voiced increased concerns that monetary stimulus may be overheating markets for assets ranging from farmland to junk bonds.
Bullard, 51, who calls himself the “North Pole of inflation hawks,” has been viewed as a bellwether for investors because his views have sometimes foreshadowed policy changes. He was the first Fed official in 2010 to call for a second round of asset purchases.
Bullard joined the St. Louis Fed’s research department in 1990 and became president of the regional bank in 2008. His district includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
