Bullard: Implied policy rate path from financial futures is “closer to the St. Louis Fed path for 2017 and 2018”
LONDON, England (PRWEB)
June 29, 2017
Federal Reserve Bank of St. Louis President James Bullard addressed “The Path Forward for U.S. Monetary Policy in a Global Context” on Thursday during the Official Monetary and Financial Institutions Forum’s City Lecture.
Given that the U.S. economy remains in a low-growth, low-inflation, low-interest-rate regime, the current level of the policy rate (i.e., the federal funds rate target) is appropriate, Bullard noted. “The most likely outcome over the forecast horizon is that the regime persists and, hence, the current level of the policy rate remains appropriate,” he said. “Many future developments could impact this policy path, but the Fed does not need to act pre-emptively with respect to any of them.”
The Low-Growth, Low-Inflation, Low-Interest-Rate Regime
In looking at the low growth rate of U.S. real gross domestic product (GDP), Bullard said data since the financial crisis suggest that the U.S. has converged to 2 percent real GDP growth, while inflation remains low.
He noted that the most recent estimate for real GDP growth in the first quarter is 1.4 percent at an annual rate (according to the Bureau of Economic Analysis). He also observed that tracking estimates for second-quarter real GDP growth suggest some improvement from the first quarter, but not enough to move the U.S. economy away from a regime characterized by 2 percent trend growth. “The 2 percent growth regime appears to remain intact,” he said.
Bullard then discussed the low level of inflation in the U.S. and how the inflation rate has been below the…