The U.S. Federal Reserve will keep its monetary policy stance loose for a long while despite increasing signs of concern among policymakers about the potential costs of asset buying, a top Fed official said on Friday.
"Fed policy is very easy and it's going to stay easy for a long time," James Bullard, St. Louis Fed president, said in an interview with CNBC television.
Minutes released from the U.S. central bank's policy meeting last month showed a number of officials think the Fed might have to slow or stop buying bonds before seeing the pickup in hiring which the program is designed to deliver. Bond buying is one of the key elements in the Fed's monetary stimulus.
Many analysts nevertheless think the Fed's leadership will determine the economic benefits of the maintaining the bond purchases for some time are likely to outweigh the financial risks.
Bullard, who has a vote this year on the Fed's policymaking Federal Open Market Committee (FOMC), has expressed caution about expanding the central bank's balance sheet too far. He has advocated scaling back the bond purchases as the labour market improves.
On Friday, Bullard acknowledged more voices within the FOMC are pressing to scale back bond buying. Some Fed members are concerned their easy monetary policy could soon fuel inflation.
"The idea of tapering the program at some point in the future may be gaining some steam on the committee," he said.
But Bullard also noted that the inflation rate is not threatening to breach the Fed's 2 percent target.
"The Fed has room to manoeuvre because of this," he said.
The Fed has more than tripled the size of its balance sheet since 2008 to around $3 trillion (1.96 trillion pounds) through a series of bond-buying programs. It opted in January to keep purchasing assets at an $85 billion (55 billion pounds) monthly pace until the U.S. labour market outlook improved substantially.
In a policy shift late last year, the Fed committed to keeping interest rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation is not forecast to go above 2.5 percent over a one- to two-year horizon. The jobless rate stood at 7.9 percent in January.
While many analysts expect the Fed to keep its bond-buying program in place throughout 2013, some worry this could fuel asset bubbles. Bond-buying programs in other countries are also seen as exacerbating this risk.
"I don't think they (in the Fed) are vigilant in terms of other central banks and their quantitative easing policies," Bill Gross, founder and co-chief investment officer of bond giant PIMCO, told the same CNBC program. "And I don't think they are vigilant in terms of asset prices."