Fed's Bullard sees only one rate hike in next 2.5 years

Jun 17, 2016, 2:55 PM EDT
Eagle at the Atlanta Fed.
(Source: donielle/flickr)

James Bullard, president of the St. Louis Fed, said he sees only one rate hike of a quarter point as most apporpriate for the forseeable future.

Reuters reports:

The U.S. economy may only need one rate hike for as long as 2-1/2 years and the Federal Reserve is eroding its credibility by indicating otherwise, St. Louis Fed President James Bullard said on Friday in arguing for an overhaul of how the central bank views and discusses policy. Bullard called for the Fed to discard its practice of projecting long-run values for things like economic growth and the target policy rate, acknowledge it has little certainty about the future, and state that the economy is not likely to get much worse or much better than it is now, absent some outside shock. Bullard said he felt the appropriate federal funds rate is around 0.63 percent, roughly a quarter point above where it stands, and will likely stay there "for the foreseeable future." For the Fed to publish projections that it will rise steadily to historic norms of three or four percent has been misleading. mobile.reuters.com/article/businessNews/idUSKCN0Z315J

CNBC notes:

That means economic growth around 2 percent — though without a recession — limited productivity gains and the associated wage hikes, and muted inflation. On its own, that forecast wouldn't be terribly shocking, if it hadn't come from a leading member of a central bank that only a few weeks ago had been talking up rate hikes and economic growth with a strong sense of certainty. www.cnbc.com/2016/06/17/message-from-the-fed-this-is-as-good-as-its-goin...

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