St. Louis Federal Reserve Bank President James Bullard said Thursday that a bubble could form in the U.S. economy even as the central bank tapers its easing policy.
"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 happened in the 2004-2006 period," he said at the Credit Suisse Asian Investment Conference in Hong Kong.
Bullard noted that in 2006, the housing prices had already started to peak at the same time the Fed was tightening its policy.
Recommended For You
"Just because you are moving away from accommodation doesn't mean the risk of a bubble forming is going away," he said.
Still, Bullard told the conference he did not see anything as large as the previous tech or housing bubbles on the horizon.
Since late 2008, the Fed has held interest rates near zero and carried out a massive bond-buying program to battle the recession.
Last week, the Fed said it expected to keep interest rates near zero for a considerable time after the quantitative easing ends.
In an interview with Reuters TV in Hong Kong, Bullard said the Fed would only consider hiking rates when inflation rises.
"Inflation is very low in the U.S. I'm projecting that it will move back to target in 2014, but so far that hasn't happened," he said.
He maintained that he saw interest rates at "normal levels" of four or 4.25 percent by 2016. Bullard is a non-voting member of the Federal Open Market Committee this year.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
