Fed's Bullard says inflation, employment goals 'within sight'

LITTLE ROCK (Reuters) - The U.S. economy is within sight of the Federal Reserve's inflation and employment goals, and is expected to grow at a "robust" pace for the rest of the year, St. Louis Federal Reserve Bank President James Bullard said on Friday.

The Fed "is much closer to its policy goals than it has been in the past five years," Bullard told a banking conference here, and is in fact closer to those goals than it has been for much of the time since 1960. Those goals are two percent inflation and full employment.

Poor growth during a harsh winter will give way to robust growth for the rest of the year, he said. He did not indicate whether the rosy forecast, backed up by data this week showing strong housing starts and an uptick in consumer prices, might move up the Fed's plans for raising interest rates.

But it follows relatively bullish statements by other Fed members at the most recent policy-setting meeting.

Bullard does not currently vote on the policy panel.

The St. Louis Fed chief has been among the optimists about the direction of the economy. He expanded those credentials on Friday in remarks that focused on the "tame" reaction around the world to the Fed's slow winding down of its asset purchases.

The smooth progress of the taper, he said, is in contrast to the "tantrum" that roiled global equity markets in early 2013 - before the taper had begun. Bullard said he feels global investors have also changed perceptions and have faith that the U.S. economy is now strong enough to hold up despite the Fed's withdrawal of its stimulus program.

He also reiterated the Fed's conclusion that the flat first-quarter GDP reading was an anomaly that stemmed from the unusually snowy winter.

"While first-quarter GDP growth was weak, growth in coming quarters is still predicted to be robust," and for the full year could surpass the 2.6 percent level reached in 2013, he said.

Despite steady progress toward the goals the Fed needs to reach before ending the long era of loose monetary policy and raising interest rates, its job is not finished, Bullard said.

"Labor markets do not seem to be fully recovered."

Still, "Fed goals are within sight," he said, a fact that justifies the steady winding down of its asset purchases. Asset buying is expected to end this fall, at the Fed's October or December meetings.

(Reporting By Howard Schneider; Editing by Andrea Ricci)

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