Fed’s Bullard Voted for a Rate Cut as Insurance

St. Louis Fed President James Bullard wanted his fellow central bankers to approve an “insurance” rate cut at this week’s meeting as a guard against weaker growth and low inflation.

In a statement Friday, Bullard explained his vote against the Federal Open Market Committee’s decision to leave its benchmark interest rate unchanged. He was the only one of 10 committee members to dissent, although documents related to the meeting indicated considerable uncertainty about future policy.



Low price pressures and an uncertain outlook with GDP growth “expected to slow” were central to his thinking. He differed with Chairman Jerome Powell’s assessment in May that inflation that has remained below the Fed’s 2% target is the result of “transitory” factors.

“In light of these developments, I believe that lowering the target range for the federal funds rate at this time would provide insurance against further declines in expected inflation and a slowing economy subject to elevated downside risks,” Bullard said. “Even if a sharper-than-expected slowdown does not materialize, a rate cut would help promote a more rapid return of inflation and inflation expectations to target.”

via CNBC

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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