Bullard Wants “Insurance” Cut to Fight Low Inflation

While the focus was on Powell on Wednesday, St. Louis Federal Reserve Bank President James Bullard highlighted the importance of higher inflation. Bullard repeated his call for an interest rate cut, saying the Fed needs to nudge inflation expectations higher.
James Hyerczyk

After Fed Chair Powell’s first day of testimony before the House Financial Services Committee ended on Wednesday, there was no room for a letup ahead of Thursday’s session with the House Banking Committee, with the central bank releasing the minutes from its June meeting at 18:00 GMT.

In summary, the minutes revealed that Federal Reserve officials at the June 18-19 meeting saw the case for easier monetary policy gaining momentum.

Here are some of the highlights.

Members See Need for Cushion

“Several participants noted that a near-term cut in the target range for the federal funds rate could help cushion the effects of possible future adverse shocks to the economy.”

Heightened Concerns Over Inflation

“Some participants also noted that the continued shortfall in inflation risked a softening of inflation expectations that could slow the sustained return of inflation to the Committee’s 2% objective.”

More Data Needed

Policymakers kept their benchmark interest rate unchanged in June with one member voting for a 25-basis point rate cut. However, “some” felt the need for more data before moving ahead with a rate cut.

“There was not yet a strong case for a rate cut from current levels,” according to the meeting’s summary.

Downside Risks Acknowledged

“Participants generally agreed that downside risks to the outlook for economic activity had risen materially since their May meeting, particularly those associated with ongoing trade negotiations and slowing economic growth abroad,” according to the minutes.

Moving on to U.S. Inflation Data

A key measure of U.S. inflation, the core consumer price index will be released on Thursday. It is expected to have increased 0.2% in June from the prior month, while the broader CPI is forecast to remain unchanged.

While the focus was on Powell on Wednesday, St. Louis Federal Reserve Bank President James Bullard highlighted the importance of higher inflation. Bullard repeated his call for an interest rate cut, saying the Fed needs to nudge inflation expectations higher.

In a speech at an OMFIF Foundation meeting at Washington University, Bullard said the Fed should be concerned that inflation remains stubbornly below its 2 percent target.

Bullard also pushed for the Fed to take “insurance” against an economic shortfall. “I think trade uncertainty is going to slow down global growth and that will feed back into the U.S. economy. What we’d like to do is take out some insurance against the possibility of a sharper-than-expected slowdown.”

Don't miss a thing!

Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US