September 20, 2019
St. Louis Fed President James Bullard said he’d like to see the Federal Open Market Committee get the policy rate to an appropriate level and then react to data going forward. Bullard, who dissented in favor of a 50 basis point rate cut at the latest FOMC meeting, discussed his decision during an interview with Jeremy Siegel and Jeremy Schwartz on Wharton Business Radio.
Bullard noted that there's no reason for the federal funds rate to be as high as it is in a world that has extremely low nominal interest rates. “The only reason to do that would be if you thought you had an inflation problem, but we don't really have an inflation problem,” he said. “If anything, our inflation rate is too low.” He also pointed to trade uncertainty and a slowdown in U.S. manufacturing as reasons to support a larger cut.
Bullard also said recent cuts in the policy rate were insurance against downside risks. “It's very possible that we've done enough, or will have done enough by the end of the year,” he said, explaining that if it turns out the economy looks good, the FOMC will be in a position to take back these insurance cuts later.
This content originally aired on Wharton Business Radio, Channel 132 on SiriusXM.