July 18, 2019
St. Louis Fed President James Bullard said a policy rate cut by the Federal Open Market Committee in July would help re-center inflation and inflation expectations around the Fed’s 2% inflation target. During an interview on CNN International, he also shared his views on the U.S. economy, the yield curve, the Phillips curve and the possible impact of trade uncertainty.
Regarding a possible rate cut at the upcoming FOMC meeting, Bullard said it would be a good opportunity to try to hit the Fed’s 2% inflation target. “The critical thing is to get inflation and inflation expectations better centered on our 2% inflation target,” he said. “Credibility is important. We missed our inflation target on the low side for many years.”
In the interview, Bullard also weighed in on the yield curve, parts of which are inverted. “So one thing I’d like to do is kind of straighten out the yield curve, have a nice upward slope, kind of a natural slope to the yield curve,” he said, adding it would bring the Fed more in line with where markets think growth and inflation are going in the medium term.
On the impact of trade uncertainty on the U.S. economy, Bullard noted that uncertainty from trade was higher now than in the past. “I think we're in for a long period of higher trade uncertainty than what we're used to,” he said. “I think we're just going to have to cope with the idea that this is going to be a volatile area of policy, at least over the forecast horizon and maybe even much longer than that.”