The Federal Reserve was neither hawkish nor dovish when it set a formal inflation target, and such a move would make sense even if the U.S. central bank had a single mandate, a top Fed official said on Monday.
St. Louis Fed President James Bullard, in slides prepared for a speech, did not comment specifically on monetary policy ahead of next week's Fed policy meeting in Washington. Instead he defended the Fed's decision in January to target a 2-percent inflation rate.
Much of the discussion about the dual mandate is, in my view, really about the nature of the Fed's reaction function to economic events, he said in a statement before addressing the Utah State University Jon M. Huntsman School of Business. Inflation targeting is consistent with hawks, doves and even bubbles.
Bullard, who does not have a vote on the Fed's policy-setting panel this year, is a centrist in the spectrum of policymakers that ranges from hawks, who worry about inflation getting out of hand, and doves, who worry about the high unemployment rate that is now at 8.2 percent.
Some politicians have argued that the Fed should drop the maximum employment portion of its mandate and concentrate on a single mandate of stable prices.
(Reporting by Debbie Hummel in Logan; Writing by Jonathan Spicer in New York; Editing by Chizu Nomiyama)