3/24/2017, 4:24 PM (Source: TeleTrader)
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Bullard: One more hike can get inflation on track

Contrary to the median assessment of officials from the United States Federal Reserve that it will be appropriate to take the benchmark interest rate 0.5 percentage points higher in two steps before the end of the year, James Bullard says one quarter-point increase would be sufficient to achieve price stability. The head of the central bank's subsidiary in St. Louis suggested a revenue-neutral tax overhaul and deregulation may bring results, while that the system needs younger people to be allowed to immigrate. 

The low growth in real gross domestic product paired with "low-safe-real-interest-rate regime" is unlikely to change dramatically this year, in his words. "Because of this, the Fed’s policy rate can remain relatively low while still keeping inflation and unemployment near goal values. The new fiscal policy could impact productivity growth and therefore improve the pace of real GDP growth," according to the central banker. This year Bullard is a non-voting member of the Federal Open Market Committee.

The policymaker stressed it is time for him and his peers "to consider" ending reinvestment in order to normalize the Fed's balance sheet in a "more natural adjustment of rates across the yield curve." He also noted the unemployment rate has declined only a few tenths of a percentage point in the last one and a half years, while that nonfarm employment growth is at only 1.6% for February, compared with 2.3% one year before.

Baha Breaking News (BBN) / IT