Risking Recession, Says Bullard on Further Rate Rises
Since the Federal Government meeting back in December, there’s been a great deal of concern regarding the state of the American economy. The financial markets themselves have been in a state of disarray. This is because many traders believe that the Federal Government’s insistence on additional rate rises is excessive and they have concerns regarding the slowed overseas growth.
However, in light of this state of affairs, the head of the Fed’s St. Louis division, James Bullard, has stated that the current rates are at a “good level.” This is a figure achieved after 9 different increases which started in December 2015 as part of the Fed’s initiative to normalize the monetary policy. Additionally, it’s been used as a measure to settle down inflation.
The Fed argues that it only raises rates when such a course of action can be justified by the economy. However, at the same time, Bullard has shared the opinion that the Fed is treading dangerous waters with these increases and any more pressure is likely to result in recession.
Bullard also shared that he doesn’t necessarily think that the Fed will reduce the rates but expressed a general openness to the idea if the situation unfolded in such a way that it would be deemed necessary. Examples of such a situation would be if the economy slowed down or if the inflation outlook significantly deteriorated.
It also seems that Bullard has an optimistic view of how the financial year will turn out. He anticipates that growth in 2019 will settle at 2.25 percent or maybe even 2.5 percent. He also predicts that the unemployment rate will continue hovering around its current level. The current volatility in the financial markets doesn’t deter him as he believes it’s an indicator of a healthy market.