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Fed May Need to Cut Rates Soon on Trade Worry and Weak Inflation, St Louis Fed President Bullard says

Jun 03, 2019

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

  • 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 

 

 

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