Rate Hike Would Be 'Unwise': Fed's Bullard
Feds Williams: Gradual policy normalization the best course Speaking from LA
- Fed dealing with outside sources
- Economy still needs gentle shove from fed policy
- US economy. All in all looking pretty good
- Things are looking good on employment
- Sees increasing signs wage growth is picking up
- Forecast 2.25% GDP growth in 2016
- expects inflation moving to 2% over next 2 years
- Fed policy data dependent
- Fed dealing with outside forces
- Gradual path of rate increases preferred route
- Downward pressure on inflation from oil dollar should peter out.
- Fed is closely monitoring potential spillovers from China, Brazil, others
- no sign market woes have derailed the economy
- Steep rent rise a reflection of US economic strength
The EURUSD has moved lower along with the USDJPY since the comments. The USDJPY is trading at new session lows (and with that combination the EURJPY is also reaching new lows).
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One of the most hawkish Federal Open Market Committee (FOMC) members and president of the Federal Reserve (Fed) in St. Louis, James Bullard, warned that it would be 'unwise' for the Fed to raise interest rates further, as inflation expectations are declining and global markets are in turmoil.
For most of 2015 Bullard argued for an early rate hike. Now he has changed his stance to more dovish, as he said he feels that key assumptions for further rate hikes have been undermined.
The inflationary outlook has fallen 'too far for comfort', and it will most probably stay away from the Fed's 2% target, Bullard said in remarks prepared for delivery to a gathering of financial analysts.
"I regard it as unwise to continue a normalization strategy in an environment of declining market-based inflation expectations," he said. In addition, slumping equity markets have made dangerous asset bubbles 'less of a concern over the medium term.'
Even though it is fairly obvious from the comments of other Fed officials that the US central bank will not raise rates in March, Bullard's comments show broad concern over the conditions of the US and global economy. The fact that Bullard, usually a strong advocate of higher rates, feels concerned and turned dovish, speaks volumes.
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