St. Louis Federal Reserve Bank President James Bullard told reporters after a speech at the Global Interdependence Center the December jobs report showing 85,000 jobs were shed and unemployment steady at 10 percent would not change the Fed's policy.
It was different from expectations but not far enough to really change assessments of policy, said Bullard, who votes on the U.S. central bank's policy-setting Federal Open Market Committee (FOMC) this year.
I do think we'll see positive job growth in the first part of 2010, Bullard said.
News of persistent weakness in the U.S. labor market cooled optimism about the economic recovery and kept pressure on President Barack Obama to help employers.
Bullard said that the pace of job losses had slowed even though unemployment remained high. The challenge for policymakers will be to adjust the central bank's extensive securities purchases, he said.
Forces driving the U.S. economic recovery include stronger-than-expected global growth, especially in Asia, he said. Other forces include stabilizing consumer spending and housing markets and less stress in financial markets, Bullard said.
The Fed has chopped benchmark interest rates to near zero and flooded the financial system with over $1 trillion in an effort to pull the economy out of the deepest recession in decades.
Policy-makers have pledged to keep rates exceptionally low for an extended period to nurture the fragile recovery that appears to be taking hold.
However, many analysts question whether the recovery can be sustained once government aid is removed. December's job losses underscored the persistent weakness of the labor market, which is critical to the return to economic health.
In his third public speech during a trip to China, Bullard said the Fed's liquidity programs were not an inflationary concern, and he signaled the U.S. central bank was in no rush to raise rates.
Interest rates may remain low for quite some time, he said.
He said any risks of igniting inflation by mishandling the Fed's exit from its support policies lie two to four years in the future.
I do think we will handle it in an appropriate way, Bullard told the conference.
The St. Louis Fed chief repeated comments urging financial markets to look to the Fed's management of its extensive securities purchases for an understanding of how the central bank will begin to withdraw its extraordinary monetary stimulus.
Markets should be focusing on quantitative monetary policy rather than interest rate policy, he said.
The Fed has bought $300 billion of longer-term Treasury securities and is in the process of buying almost $1.4 trillion in mortgage-related debt.
Central bank officials have expressed confidence they have the necessary tools to implement their exit strategy but have not publicly discussed the timing and sequencing of the withdrawal. They have also not made clear whether they will hold on to the longer-term securities they have purchased or begin to sell them off once they will decide to tighten financial conditions.
(Writing by Mark Felsenthal; Editing by Tomasz Janowski)