U.S. rate cut will 'ratify' what people already expect - Fed's Bullard

By Trevor Hunnicutt NEW YORK (Reuters) - An interest rate cut may be necessary at this point, but that does not mean the Federal Reserve is on a path to dramatically lower rates, St. Louis Fed President James Bullard said on Friday. Bullard, who argued unsuccessfully for such an immediate cut at the Fed's last meeting, told reporters it would be 'very difficult' at this stage to not deliver

Reuters July 20, 2019 02:06:05 IST
U.S. rate cut will 'ratify' what people already expect - Fed's Bullard

US rate cut will ratify what people already expect  Feds Bullard

By Trevor Hunnicutt

NEW YORK (Reuters) - An interest rate cut may be necessary at this point, but that does not mean the Federal Reserve is on a path to dramatically lower rates, St. Louis Fed President James Bullard said on Friday.

Bullard, who argued unsuccessfully for such an immediate cut at the Fed's last meeting, told reporters it would be "very difficult" at this stage to not deliver.

Cutting rates could reset people's expectations for inflation and reset relative U.S. government bond prices, or the "yield curve," to a level more conducive to growth. But it may take time to see, said Bullard, who has endorsed a 25 basis point rate cut at the July 30-31 meeting.

"Signals were that we were highly likely to ease at the July meeting - so now that's all been priced into the market - so if you try to take that out I think it would be very difficult at this stage," Bullard said on the sidelines of a conference at Columbia University. "So you might as well follow through and ratify that and then see how the economy develops going forward."

Bond markets already point to a willingness by investors to revisit their inflation expectations, he said.

But cutting rates does not mean the Fed is necessarily in an "easing cycle," he said or on a pre-set course to lower rates further. Fed officials, he said, will need to decide what to communicate about what economic data will matter to them when they take their next steps.

Worse outcomes in U.S. trade negotiations or a poor response by inflation to Fed easing could create reasons to ease policy further, he said.

There is no need, Bullard said, for the Fed to revisit current plans to continue letting government debt securities it bought to stimulate the economy after the 2008 financial crisis roll off its balance sheet without buying more bonds to replace them.

The central bank has been under pressure to cut rates dramatically and end that shedding of bonds, most notably by President Donald Trump, who on Friday accused the central bank of a "faulty thought process" and also called for an end to "quantitative tightening," a reference to the bond runoff.

Bullard previously said he was approached by the White House about a possible seat on the Federal Reserve Board of Governors but that he would not consider leaving his current job. Trump ended up announcing that he would nominate the St. Louis Fed's research director, Christopher Waller, for the job.

Asked if he would accept a position as chair of the Fed Board of Governors, Bullard said yes.

"Fed chair is, of course, something I'd love to do," he said. "If I ever got that honour I would certainly take it."

(Reporting by Trevor Hunnicutt; Editing by Andrea Ricci)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.