U.S. interest rates can likely remain low through at least 2017, with no clear sense yet of whether the new Trump administration’s policies will touch off higher inflation or growth, St. Louis Federal Reserve Bank President James Bullard said on Thursday.
Bullard has said that the current target rate of between 0.5 percent and 0.75 percent is roughly appropriate for an economy stuck in a low-growth, low-inflation rut.
That situation “has been many years in the making and is unlikely to turn around quickly,” Bullard said in morning remarks at Washington University in St. Louis. “A relatively low policy rate will remain appropriate.”
Despite administration talk of large tax cuts and infrastructure spending, actions that could stoke inflation in an economy considered near full employment, Bullard said inflation expectations remain low.
“It does not appear that undue inflationary pressure is building so far,” Bullard said.
The Fed raised its policy rate in December, the second such move in two years. That glacial pace is expected to accelerate this year. Policymakers are eager to move as far as possible from the zero lower bound hit during the financial crisis, and the economy is near the Fed’s goals of two percent inflation and full employment.
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