5/8/2017, 3:57 PM (Source: TeleTrader)
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Fed's Bullard: Appropriate rates will remain low

Over the forecast horizon, the natural rate of interest and related policy rate of the Federal Reserve are expected to stay low and it is unlikely they will change much, according to James Bullard, president of the United States central bank's subsidiary in St. Lois. In a presentation held on Monday in Atlanta, the non-voting member of the Federal Open Market Committee said the basic measure can be influenced by labor productivity growth, labor force growth, and investors' desire for safe assets. The last factor reflects the declining trend on real returns to holding government paper, not on capital, he stated.

The natural rate is seen at 67 basis points or 155 basis points in two settings, where the current setting of 88 points is therefore appropriate, Bullard noted. He said the US is in a regime with a high desire for safe assets and that the economy is in a low labor productivity growth regime with almost the entire probability. It is in the low state at 1.26%, compared to the high state of 3%, he stressed. The labor force had been growing at a 1.33% annual rate until the Great Recession and at 0.45% since, pointing to low-growth state, the St. Louis Fed chief noted.

Baha Breaking News (BBN) / IT