MNI: Fed's Bullard Not Convinced Of Looming Credit Crunch

St. Louis Fed President James Bullard said Thursday he doesn’t think the recent banking turmoil is enough to generate a recessionary tightening in U.S. credit conditions.

“I’m less enamored with the story that credit conditions will tighten appreciably. I just don’t think it’s big enough by itself to send the U.S. economy into recession,” Bullard told reporters in a telephone briefing, arguing that only a small part of U.S. credit markets rely directly on the banking sector.

“It’s not that clear to me that there will be much of a pullback on lending by these types of banks because they say loan demand remains relatively robust.” (See MNI INTERVIEW: Small, Midsize Credit Seizing Up, Says Kaplan)

Bullard says the apparent easing of financial turbulence gives the Fed room to keep fighting against inflation that remains too high.

“We need to stay at it and make sure we get the disinflationary process in place so you don’t get a repeat of the 1970s,” he said. “It’s a good moment to continue to fight inflation and get on that disinflationary path.”