(Reuters) – The U.S. Federal Reserve and the European Central Bank both have enough credibility to engineer a reduction in inflation without causing a deep recession like the last time the U.S. central bank battled such fast-rising prices, St. Louis Fed President James Bullard said on Friday.
“The Volcker disinflation was costly, but it was not credible initially—Volcker had to earn credibility,” Bullard said at the Barcelona School of Economics Summer Forum, referring to Fed Chair Paul Volcker, who sent unemployment soaring 40 years ago with his sharp interest-rate hikes. “The Fed and the ECB have considerable credibility, suggesting that a soft landing is feasible in the U.S. and the euro area if the post-pandemic regime shift is executed well.”
(Reporting by Ann Saphir)
