Fed's Bullard: After Three Rate Cuts, It's Now Time for Fed to Hold Steady -- Update
November 14 2019 - 4:04PM
Dow Jones News
By Michael S. Derby
Federal Reserve Bank of St. Louis President James Bullard said
he doesn't see any need to lower interest rates beyond the three
cuts the U.S. central bank has made this year.
"Now it makes sense to wait and see how the economy responds
during the fourth quarter here and into 2020" before contemplating
further action, Mr. Bullard told reporters after a speech in
Louisville, Ky., on Thursday.
Mr. Bullard said that even if new economic data is unexpectedly
weak, it shouldn't change that view over the near term. "Even if
you've got...some data that surprised in this environment, you
might make the argument that we've been pre-emptive already," he
said.
"The rate cuts that we've had in the last three meetings are
providing insurance against more substantial slowdown in the U.S.
economy," Mr. Bullard said. "Once we get on the other side of this
process, then we can think about whether we want to...possibly take
back those insurance cuts, as we did in the 1990s," he added.
In Mr. Bullard's prepared remarks, he said the U.S. economy was
getting stimulus from central-bank policy beyond what three
interest-rate cuts would normally produce.
"U.S. monetary policy is considerably more accommodative today
than it was as of late last year," Mr. Bullard said. The Fed "has
taken actions that have changed the outlook for shorter-term U.S.
interest rates considerably over the last 12 months, ultimately
providing more accommodation to the economy," he said.
Mr. Bullard, a voting member of the rate-setting Federal Open
Market Committee, has been a strong advocate of lowering rates this
year, even dissenting at one meeting in favor of a bigger rate cut
than his colleagues favored.
The Fed has lowered rates three times in 2019. The overnight
interest-rate target range now stands between 1.50% and 1.75%. Most
Fed officials have said they are on board with holding steady on
rates for now.
Mr. Bullard said the Fed's move away from predicting rate
increases in future years has also helped shift financial
conditions to a more stimulative profile. The shift in monetary
policy's support of the economy "has been much larger than the
three latest rate reductions alone would suggest because the
expectation as of late last year was that the FOMC would actually
raise rates further in 2019," he said.
The Fed lowered rates and shifted its outlook as trade
uncertainty and slowing global growth weighed on the outlook of an
otherwise healthy economy. Mr. Bullard noted that when it comes to
trade and broader economic uncertainty "the economy faces downside
risk that may cause the slowdown to be sharper than expected."
"I think of trade regime uncertainty as simply being high in the
current environment," Mr. Bullard said, adding "I do not expect
this uncertainty to dissipate in the quarters and years ahead."
Still, the shift in Fed policy "in the face of trade policy
uncertainty may help facilitate somewhat faster growth in 2020 than
what might otherwise occur" and help lift low inflation back to the
Fed's 2% target, he said.
Write to Michael S. Derby at michael.derby@wsj.com
(END) Dow Jones Newswires
November 14, 2019 15:49 ET (20:49 GMT)
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