Federal Reserve policymaker James Bullard said on Tuesday that zero percent interest rates were no longing appropriate in the United States, and that a rate hike in the summer would still leave policy extremely accommodative.
“Zero is no longer the appropriate interest rate for the U.S. economy,” Bullard said during a panel session at London City Week.
Monetary policy would still be “extremely accommodative” even if the central bank began with a small increase in rates “sometime in the summer,” he added.
The Fed is inching towards its first interest rate hike in almost a decade. Analysts are trying to guess its timing, having pushed back expectations last week after Fed chair Janet Yellen raised concerns about the dollar’s recent strength.
Bullard, one of the central bank’s long-time advocates of slowly raising rates, said that with the United States economy expected to grow at over three percent and inflation being pushed lower by uncontrollable factors, the time was right.
Removing the word ‘patient’ with reference to rate increases from the Fed’s policy statement last week was also an important move.
He said it would give the Fed “more optionality” and allow it to make decisions “meeting by meeting” based on the strength of economic data.