Fed Hawk Bullard Repeats View of Hiking Sooner Rather than Later

Falling unemployment and an improving U.S. economy are evidence that the Federal Reserve should start raising interest rates, a top Fed official said on Wednesday, citing risks of asset bubbles if the central bank keeps rates too low for too long.

“A risk of remaining at the zero lower bound too long is that a significant asset market bubble will develop,” St. Louis Federal Reserve Bank President James Bullard said in prepared remarks.

Bullard, a policy hawk who has long called for the Fed to begin hiking rates, repeated his view that the Fed should not wait to raise short-term borrowing costs.

“Now may be a good time to begin normalizing U.S. monetary policy so that it is set appropriately for an improving economy over the next two years,” Bullard said in remarks delivered at the annual Hyman Minsky conference. He added that “even with some normalization, monetary policy will remain exceptionally accommodative.”

Bullard, who is not a voting member on the Fed’s policy-setting committee this year, said the U.S. economy is likely to maintain a growth rate near 3 percent over the medium term.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza