Fed May Need to Cut Rates Soon on Trade Worry and Weak Inflation, St Louis Fed President Bullard says
Jun 03, 2019
- St Louis Fed President James Ballard said today the Fed may need to cut rates soon given weak inflation and the raging trade war
- Bullard’s comments are the first time a Fed official has suggested a rate cut since rates were put on hold early this year.
- At a presentation in Chicago today he said the following:
- “A downward policy rate adjustment may be warranted soon to help re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown"
- “The direct effects of trade restrictions on the U.S. economy are relatively small, but the effects through global financial markets may be larger."
- “Financial markets appear to expect less growth and less inflation going forward than the FOMC does, a signal that the policy-rate setting may be too restrictive for the current environment”
- “Even if the sharper-than-expected slowdown does not materialize, a rate cut would only mean that inflation and inflation expectations return to target more rapidly.”
- He added that the yield curve may be telling the Fed its policy is too restrictive
- Bullard is a voting member of the Fed’s FOMC and known to be dovish
- The next Fed meeting to set rates is June 18 & 19
Other recent Fed post: Fed Vice Chairman Richard Clarida: We Could Cut Rates if Growth Outlook Worsens