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Bullard Discusses Low Inflation and U.S. Monetary Policy with Bloomberg Daybreak: Asia

May 21, 2019

St. Louis Fed President James Bullard said interest rates are at a good place in the U.S. right now. “If anything, we are a little bit restrictive,” he said in an interview with Bloomberg Daybreak: Asia in Hong Kong.

Bullard explained that inflation and inflation expectations in the U.S. are low. “That is a little bit concerning to me, and I think that could be used to justify a rate cut at some point,” he said.

The FOMC could take this opportunity to try to re-center inflation expectations at the 2% target and gain credibility for the target, Bullard said.

Asked about cutting the Fed’s policy rate, Bullard said, “I think if we cut a quarter point in an environment where the U.S. economy is surprising to the upside again in 2019, that would probably send the signal that we’re serious about hitting the 2% inflation target.” He added: “I don’t think we’re there yet. I think it’s premature at this point, but this is something that could be done possibly.”

Bullard also weighed in on the U.S. trade dispute with China, saying it is too early in the process to impact U.S. monetary policy. “I think for this to actually affect Fed policy, these tariffs would have to stay on for quite a while, something like six months,” he said. “And at the end of six months if there was still no prospect of a resolution, then I think that’s the point at which it would really start to weigh on Fed policy.”

In the interview, Bullard also reflected on the success of the FOMC’s normalization program and said U.S. monetary policy is in a good position should there be another downturn down the line. He also spoke with Bloomberg Daybreak: Asia Radio while in Hong Kong, where he further discussed low inflation, monetary policy, the Fed’s balance sheet and trade.

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