President Bullard Explains His Recent FOMC Dissent

June 21, 2019

The following is a statement by Federal Reserve Bank of St. Louis President Jim Bullard explaining his dissenting vote at the FOMC’s June 18-19, 2019, meeting:

I dissented with the Federal Open Market Committee (FOMC) decision announced on June 19, 2019, to maintain the target range for the federal funds rate at 2.25% to 2.50%. In my view, lowering the target range by 25 basis points to 2% to 2.25% would have been the most appropriate course of action. The following considerations factored into my decision.

First, both the core and headline personal consumption expenditures (PCE) inflation measures have declined substantially since the end of last year and are presently running some 40 to 50 basis points below the FOMC’s 2% inflation target. Market-based measures of inflation expectations have also weakened considerably and indicate an expected inflation rate substantially below the Committee’s target. The forces that are keeping inflation below target seem unlikely to be solely transitory. While the unemployment rate is low by historical standards, there is little evidence that low unemployment poses a significant inflation risk in the current environment.

In addition, U.S. economic growth is expected to slow for the remainder of the year. Moreover, uncertainties about this outlook have recently increased.

In light of these developments, I believe that lowering the target range for the federal funds rate at this time would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks. Even if a sharper-than-expected slowdown does not materialize, a rate cut would help promote a more rapid return of inflation and inflation expectations to target.

Although I disagreed with the Committee’s decision to leave its target range for the federal funds rate unchanged, I remain confident that the Committee will continue to monitor economic developments and respond accordingly as economic circumstances dictate, and I look forward to working with my colleagues to fulfill the FOMC’s mandates.

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