May 28, 2019 — St. Louis Fed Chair Speaks to Interest Rates

MAY 28, 2019 – ST. LOUIS FED CHAIR SPEAKS TO INTEREST RATES

Last Wednesday, St. Louis Fed Chair James Bullard spoke at the Foreign Correspondents’ Club in Hong Kong.  He drew attention to two key challenges facing the FOMC: the risk of the Fed missing its 2 percent inflation target and the current trade war.

Bullard, a voting member, hinted at the need for a potential adjustment in the Fed funds rate.  He said, “a downward policy rate adjustment even with relatively good real economic performance may help maintain the credibility of the FOMC’s inflation target going forward.”  He feels, if inflation data keeps disappointing, rates may need to be lowered.  Bullard expects a ‘low-side miss’ is on the horizon for 2019.

Bullard remains optimistic about future growth prospects, but policy may need to be adjusted in response to incoming data and not a continuation of the rate normalization process.  Rates have moved up by 225 basis points from near zero levels.

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