Fed's rate decision may hurt credibility: FOMC member

NEW YORK

The Federal Reserve's decision to keep interest rates unchanged may hurt its credibility, a Federal Open Market Committee (FOMC) member, said Thursday.

“Not following through on a proposed action can damage a policymaker's credibility," said St. Louis Fed President James Bullard, while stressing that macroeconomic conditions targeted last December were met in this year's March meeting.

“The state of the U.S. economy as of the March 2016 FOMC meeting was arguably consistent with December 2015 SEP projections. Yet, the Committee did not increase the policy rate at the March meeting," he added.

During its last quarterly meeting in December, the Fed indicated that there could be four rate increases of 25 basis points each during 2016.

But last month the bank left rates unchanged. “Certainly a case could be made that as of March, the economy had progressed about as had been expected in December," Bullard said.

"Therefore, the committee might have been expected to follow through with its December policy rate projection at the March meeting."

Bullard, one of the 10 FOMC members with a voting power this year, also warned that financial markets may have trouble interpreting the Fed's future behavior.

The next rate hike, however, "may not be far off provided that the economy evolves as expected," he said.

NEW YORK

The Federal Reserve's decision to keep interest rates unchanged may hurt its credibility, a Federal Open Market Committee (FOMC) member, said Thursday.

During its last quarterly meeting in December, the Fed indicated that there could be four rate increases of 25 basis points each during 2016.

But last month the bank left rates unchanged. “Certainly a case could be made that as of March, the economy had progressed about as had been expected in December," Bullard said.

"Therefore, the committee might have been expected to follow through with its December policy rate projection at the March meeting."

Bullard, one of the 10 FOMC members with a voting power this year, also warned that financial markets may have trouble interpreting the Fed's future behavior.

The next rate hike, however, "may not be far off provided that the economy evolves as expected," he said.