Yesterday, St. Louis Fed President James Bullard, one of the most dovish policymaker, said Fed shouldn’t response to every move in trade war. He said that Fed’s shift since the beginning of the year had made monetary policy “considerably” looser already. And, he added, “I don’t think it is realistic for the Fed to respond to each threat and counter threat in a tit-for-tat trade war”.
Bullard also said the economy is still adjusting to the looser stance. And it was appropriate to “wait and see” how upcoming economic data “roll in” before deciding the next move. He noted that “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”.
