Louis Fed's Bullard Discusses the Path Forward for US Monetary Policy

Why Walmart Is Still a Threat to Amazon and Whole Foods                 

     

     Kamil Krzaczynski  Reuters

The dollar dipped to a four-day low against a basket of major currencies on Friday, as traders looked to United States inflation data due next week to provide more clues on the Federal Reserve's policy outlook.

Analysts with Action Economics noted the fed funds futures were unchanged to modestly lower with the deferred contracts underperforming, with December futures showing a 50-50 chance of another rate hike by that meeting. Their decline has been kept in check, at the same time, by key Fed officials insisting inflation is still on track to reach their 2% target.

The Federal Reserve can afford to stop raising short-term interest rates and wait and see how economic developments and Washington policy debates play out in coming quarters, said St. Louis Fed President James Bullard on Friday.

"We don't want to undermine credibility on the inflation target, but I think people react too much to one or two data reports", said Ms Mester, who is among the FOMC's more hawkish members and twice dissented against majority decisions to keep rates on hold when she was a voter in 2016. "It's important not to overreact to a few readings and data on inflation can be noisy", she said June 14.

But Bullard said the latest economic research suggests that even if the unemployment rate fell to 3.5%, the effects on inflation are likely to be small.

Bullard does not now vote on the Fed's policy-setting committee.

Yields, which fall when bond prices rise, have been remarkably steady in recent days.

Bullard said he saw no reason to raise interest rates as the economy appears to be firmly stuck in a "low growth, low-inflation and low-interest-rate regime". But investors are pricing in only around a 50 percent chance that it will hike rates again by the end of the year.

They added that there's a fine line with risk now, as risk can do well if inflation remains low while growth is robust, which is known as a "falling price boom".

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