Fed's Bullard sticks with single interest rate hike view
[ST LOUIS] St Louis Fed President James Bullard on Tuesday stuck with his view that only a single interest rate increase will be needed for the foreseeable future, despite the strong rebound in US job growth in June.
Mr Bullard, a voting member of the US central bank's rate-setting committee, recently shifted his view of monetary policy, concluding that the United States had entered a persistent period of low growth, low inflation, and low unemployment.
The appropriate target interest rate for the Fed, he said, is also low, requiring only a single rate rise unless some unexpected shock moved the economy to a better or worse state.
In remarks prepared for delivery at the St Louis Fed on Tuesday, Mr Bullard did not mention the stronger-than-expected employment report last week that showed the economy generated 287,000 jobs in June.
But under his new view, Mr Bullard argued that the Fed's rate outlook does not need to change until it is clear that a significant event like a recession or jump in productivity changes the "regime."
"The policy rate would likely remain essentially flat over the forecast horizon to remain consistent with the current regime," he said in the prepared presentation. He sees the appropriate federal funds rate as 0.63 per cent, about a quarter point above the current effective rate of around 0.37 per cent.
The Fed is not expected to raise rates at its next policy meeting later this month, as it weighs steady US job growth against persistent low inflation and a series of global events that have posed risks to the economic recovery.
Fed policymakers expect one more rate hike this year.
REUTERS
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