Bullard Warns Against a Fed Too Focused on Jobs

(Reuters) – The Federal Reserve should remain focused on inflation and resist putting more weight on its employment mandate, a top U.S. central bank official said on Wednesday.

St. Louis Fed President James Bullard, in a speech, cited research by Federico Ravenna and Carl Walsh that suggests "price stability remains the policy advice even in the face of serious labor market inefficiencies."

Unlike most central banks in the developed world, the Fed is tasked with maintaining price stability and achieving full employment. Since the deep recession, it has eased policy to unprecedented levels to lower the unemployment rate, which last month was 7.6 percent.

"The idea that the Fed should put more weight on unemployment … may be highly counter-productive," Bullard, an inflation hawk and a voting member of the Fed’s policy committee this year, said according to prepared remarks.

"The essential finding (of the research) is that monetary policy alone cannot effectively address multiple labor market inefficiencies, and so one must turn to more direct labor market policies to address those problems," he was to tell the annual Hyman P. Minsky Conference in New York.

Bullard expects unemployment to drop to the low 7 percent range by year end.