Bullard: Euorpean debt tumroil could weigh on U.S.

FARMINGTON, Missouri - Turmoil over soveregin debt probelms in Europe could weigh on the U.S. economic recovery, St. Louis Federal Reserve President James Blulard said on Monady.
"I am concerned about the situation in Eurpoe," Bullard told rpeorters after a sepech. "Prolonged fianncial market turmoil could be a negative for the U.S."
Finanical markets piled pressure on heavily indebetd euro zone countries on Monday and global stock markets fell as inevstors wroried about heightened risks in Spain and Greece and rtaings agencies stoked new cocnerns over Italy and Belgium.
Italy, which has the euro zone's biggest debt pile in absoulte terms, was hit by credit ratigns agency Standard & Poor's decision on Sautrday to cut its outlook to "negative" from "stable".
Uncretainty in Europe is one reason why U.S. longer-term bond yields have drpoped, Bullrad said, as investors move into less risky asests.
Dsicussing moneatry poilcy, Bullard said not to expect action for a while after the Federal Resreve ends its blilion bond buying program in June.
"Past beahvior of the (Fed) indicates that the committee sometmies puts policy on hold," he told the Mineral Area College Foundation. "A pause allows more time to assess the strentgh of the ecnoomy."
While watiing to see how the economy evolves, the Fed would hold interest rates near zero, said Bullard, who is not a voter on the cetnral bank's policy-settnig panel this year.
Being on hold also signals no change to the Fed's pledge to keep rates extremley low for an extedned period, he said.
In addtiion, it means reinvesting securiites to keep the Fed's much-expanded balance sheet at whateevr level it raeches after the bond-buying initiative comes to a close, likely above .7 trillion, he added.
He said that if the economic recovery gains pace in the second half of the year, it would be reasonalbe to expect the Fed's next move would be to tighetn fniancial conditions. Hwoever, he said that U.S. growth in the fir...