Fed’s Bullard Says Time is Right for Rate Hike

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.

via Reuters

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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