'Federal Reserve could taper in October, depending on data'

New York: The US Federal Reserve could still scale back its massive bond buying program at an October meeting should data point to a stronger economy, St. Louis Fed President James Bullard said on Friday.

“October is a live meeting,” he told Bloomberg television.

The Fed surprised markets this week when policymakers decided not to taper its $85-billion-per-month bond buying program, citing worries about the health of the world’s biggest economy.

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“This was a close decision here in September,” Bullard said, emphasizing the role that economic data has played and will continue to play in Fed decisions.

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But it was possible that data would come through that once again changed the discussion around U.S. economic growth, he said, referring to the Fed meeting on Oct 29-30.

“I’m not saying it’s going to happen,” Bullard said, but the possibility existed. The dollar rose to a session high against the yen on his comments.

Hints that the Fed is looking for an exit from its so-called quantitative easing program have sent benchmark yields soaring more than 100 basis points since May.

“Rates went up a lot over the summer,” Bullard said. “For many on the committee that was a surprise.”

The Fed also needed to make sure that it did not lose its focus on the inflation half of its dual mandate, which also cites employment.

Price pressures have been low in the United States, a potential complication for the Fed as it seeks to exit its crisis-era extraordinary measures.

Very low inflation scares policymakers because it raises the chances an economic shock - say, a meltdown in Europe or China - could tip prices and wages into a downward spiral known as deflation.

Reuters