Fed’s Bullard Vouches for Waiting for Effect of Cut Before Another One

There has been a “sea change” in Federal Reserve policy over the past several months that will need time to make its way through the system before its effects can be gauged, St. Louis Fed President James Bullard said Tuesday.

Easier monetary policy has resulted in a plunge in government bond yields, taking the benchmark 10-year Treasury note down from around 2% in mid-June to closer to around 1.74% Tuesday. That drop comes less than a week after the Fed voted to lower its benchmark interest rate by 25 basis points to a range of 2% to 2.25%.

Bullard has been one of the biggest advocates for a cut, but did not commit to further moves in a speech he delivered in New York.

“While additional policy action may be desirable, the long and variable lags in the effects of monetary policy suggest that the effects of previous actions are only now beginning to impact macroeconomic outcomes,” he said in a slide presentation to the National Economists Club.

His comments reiterated statements he made in a Wall Street Journal interview, telling the paper that he wants to see the impact of the rate cut before assessing further moves.

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