Fed's Bullard: Global output may drive U.S. prices (by Greg Robb)

WASHINGTON (MarketWatch) - Economic research indicates that global output may be behind the recent strength in U.S. inflation, said James Bullard, the president of the St. Louis Federal Reserve Bank. Bullard made the remarks in a speech to a closed-door academic conference in Beijing last week. The St. Louis Fed released his presentation on Monday. Economists believe there is a negative output gap in the U.S. as actual gross domestic product is below the potential growth rate. This gap is often shown by the high level of U.S. unemployment. The global gap may be positive, or more than full capacity, because strong emerging market economies more than make up for weakness in advanced economies, Bullard said. This may suggest upward, not downward, pressure on U.S. inflation, he said. During his recent trip to Asia, Bullard, who does not vote on Fed interest-rate policy decisions this year, said the Fed may need to raise rates as soon as late 2013. He backed a "wait and see" stance for policy in coming months. This would allow policymakers time to see if recent positive trends in U.S. economic data continue.