Slow Normalization or No Normalization?
May 5, 2016
St. Louis Fed President James Bullard discussed two scenarios for future rate increases: the FOMC’s scenario and the market-based scenario. The former suggests a gradual pace of rate increases over the next several years, while the latter is much shallower – only a few increases over the forecast horizon. He cited evidence to back both views. For the FOMC scenario, he cited strong labor markets, waning international headwinds and inflation measurements that are closer to the 2 percent target. For the market-based scenario, the evidence included slow real GDP growth and low inflation expectations. Bullard spoke at the 35th UC Santa Barbara Economic Forecast Project hosted by the University of California, Santa Barbara.