April 17, 2019
In an interview with Yahoo Finance, St. Louis Fed President James Bullard shared his views about the U.S. economy, monetary policy, the Fed’s balance sheet and the yield curve, among other topics.
Regarding monetary policy, Bullard said, “I think since the first of the year, over the last three months or so, we’ve adjusted policy.” He added that this adjustment “shows that we’re data dependent, and it shows that we’re sensitive to what’s going on in the macroeconomic environment.”
On the yield curve, Bullard said it is “very flat right now,” adding that if there is better news coming in on the U.S. economy, he expects the yield curve to steepen going forward. “If that happens, I think we’ll be in great shape,” he added.
Bullard also noted that it is not possible for the Fed to get back to a pre-crisis level of its balance sheet for multiple reasons, such as increased reserve demand following Dodd-Frank and increased currency. He added that replacing mortgage-backed securities when they run off with short-term Treasuries “would rebalance our portfolio to look more like the Treasuries outstanding and it would move us in the right direction,” he said.
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