The St. Louis Federal Reserve president is the first Fed official to say recent events may require a central bank response.
A U.S. interest rate cut "may be warranted soon" given the rising risk to economic growth posed by global trade tensions as well as weak U.S. inflation, St. Louis Federal Reserve president James Bullard said Monday, the first Fed official to say recent events may require a central bank response.
The Fed "faces an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty, he said. In addition, both inflation and inflation expectations remain below target, and signals from the Treasury yield curve seem to suggest that the current policy rate setting is inappropriately high.
Several earlier rounds of Trump administration trade actions against China and other countries left Fed officials largely unmoved, saying there was no need to react unless trade tensions persisted or began changing the U.S. growth outlook. "A downward adjustment of the policy rate may help re-center inflation and inflation expectations at the 2 percent target," as well as provide "insurance" against a sharper than expected economic slowdown, Bullard said, comparable to rate cuts the Fed made in the mid-1990s to nudge along that expansion.
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