The Federal Reserve Bank of St. Louis President James Bullard admonished management members to halt raising rates again, however, Bullard appeared resolved that a move higher this month is pretty much a done deal.
The bank president while speaking in an interview on Fox Business Network on Tuesday complimented the economy saying: “we’ve got a pretty good policy right now and we should stay where we are and see how the data come in.”
Furthermore, the interest-rate setting Federal Open Market Committee is expected to sit later this month to increase the current rate to their target rate, whose current threshold is 1.75% and 2%. However, Mr. Bullard can do only little, as he is currently not a voting member of the committee.
Also, the president while speaking with Fox Business Network reiterated his view on rate increases; unluckily, his colleagues share a dissenting view about the looming September rate rise, in Bullard’s own words he says: “markets are putting a high probability on it. And if you talk to my co-workers, most of them seem to be speculating a high probability as well.”
The president of the Federal Reserve Bank also noted that the bond market is currently in good shape because the difference between short and long term dated yields has diminished considerably. Thus the favorable condition in the bond market is unsupported by raising rates at the moment. That is because more rate hikes could cause that relationship to turn negative, and if it did, that is a strong signal a recession may follow.
Putting in Bullard’s own words, he says: “We’re in good shape, and I think what we could do is take the signs from financial markets that are telling us that we’re almost where we need to be right now, for instance the yield curve, is very flat. I’d rather not see an inverted yield curve in the U.S. That’s usually a signal of a slowdown ahead.”
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