Fed won't "enable" irresponsible fiscal policy - Bullard

WASHINGTON Fri Sep 28, 2012 2:54am IST

President and CEO of the Federal Reserve Bank of St. Louis James Bullard poses during an interview at the Federal Reserve Bank of St. Louis June 8, 2011. REUTERS/Peter Newcomb/Files

President and CEO of the Federal Reserve Bank of St. Louis James Bullard poses during an interview at the Federal Reserve Bank of St. Louis June 8, 2011.

Credit: Reuters/Peter Newcomb/Files

Related Topics

WASHINGTON (Reuters) - The Federal Reserve will not "enable" bad fiscal policy by deliberately holding down borrowing costs in order to allow the U.S. government to go on a spending spree, a senior Federal Reserve official said on Thursday.

"That will end in tears. That is a bad policy and I'm fairly certain that none of my colleagues on the FOMC (Federal Open Market Committee) are interested in going in that direction," James Bullard, president of the St. Louis Federal Reserve, told CNBC television.

Critics of the U.S. central bank, including many top Republican politicians, complain the Fed's $2.3 trillion bond purchase program has facilitated a massive expansion of government spending by President Barrack Obama, a Democrat.

Bullard, who is not a voting member of the policy-setting committee this year but will be a voter in 2013, said the central bank would not collaborate with the government over interest rates to facilitate heavy spending.

"You don't want to get into what we would call the fiscal-dominant regime where the fiscal authority, or the Congress and the president, they are borrowing a lot of money and the Fed's role is to keep the interest rates low."

Anger among critics rose further when the Fed announced a third round of so-called quantitative easing, or QE3, earlier this month, taking bold steps to spur the economy just weeks before the November 6 presidential election.

Bullard, who has publicly stated that he would not have voted for that decision, said the Fed was focused exclusively on getting policy correct.

"We're going to pursue monetary policy that is the right one for the nation, but it is not one that is trying to enable irresponsible fiscal policy," he said. (Reporting by Alister Bull; Editing by James Dalgleish)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Press Event

Press Event

Modi takes tea, but no questions, in first press event as PM.  Full Article 

School Shooting

School Shooting

Two killed, four wounded in Washington state school shooting.  Full Article 

Sundar Pichai Elevated

Sundar Pichai Elevated

Google's Pichai to oversee major products and services.  Full Article 

Need For Reforms

Need For Reforms

Euro zone risks "relapse into recession" without structural reforms - Draghi.  Full Article 

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Health Of Lenders

Health Of Lenders

25 European banks set to fail health checks - sources.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage