HONG KONG – St. Louis Federal Reserve Bank President James Bullard said Thursday that the key risk for U.S. economy would be a bubble forming as the central bank removes monetary-policy accommodations, while he also raised concerns about financial stability in the U.S. economy.
"I don't see a major bubble right now, but one will form as we are trying to remove the accommodation in the years ahead, because that's what exactly had happened in the 2004-2006 period," Bullard told the Credit Suisse Asian Investment Conference in Hong Kong.
"I do think that's a key risk going forward," he said. Bullard related the risk to the situation in 2006, the housing prices had already started to peak at the same time as the central bank was in a tightening cycle.
"Just because you are moving away accomodation doesn't mean the risk of bubble forming is going away," he said. Bullard also emphasized that financial stability concerns are "looming large," as policy makers are thinking about how to accommodate those concerns.
He said macroprudential tools, which have been strengthened, can be used to address emerging bubbles. Bullard is a non-voting member of Federal Open Market Committee this year.
foxbusiness.com
"I don't see a major bubble right now, but one will form as we are trying to remove the accommodation in the years ahead, because that's what exactly had happened in the 2004-2006 period," Bullard told the Credit Suisse Asian Investment Conference in Hong Kong.
"I do think that's a key risk going forward," he said. Bullard related the risk to the situation in 2006, the housing prices had already started to peak at the same time as the central bank was in a tightening cycle.
"Just because you are moving away accomodation doesn't mean the risk of bubble forming is going away," he said. Bullard also emphasized that financial stability concerns are "looming large," as policy makers are thinking about how to accommodate those concerns.
He said macroprudential tools, which have been strengthened, can be used to address emerging bubbles. Bullard is a non-voting member of Federal Open Market Committee this year.
foxbusiness.com
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