In an interview with Handelsblatt published yesterday, St. Louis Fed President James Bullard said t”he wind has completely turned” in Fed’s monetary policy since January. FOMC has approached his view that there should be no more rate hikes for 2019.

Bullard said at this stage of the business cycle, he’d normally expect at least 2% inflation. But core CPI is only 1.6% and “that worries me”. He also noted that “If that persists, I will push the FOMC more to lower interest rates and try to bring inflation expectations down to two percent.”

Regarding the impact of trade war with China on the economy, Bullard said “that depends on how long they last”. “To really hurt the US, the dispute would have to continue for some time,” he added. He also noted the worry is “even bigger” in Asia or Europe. US has “such a large and diversified economy” and hence, the impact as a whole is “relatively small”.

Full interview here.

In a speech delivered yesterday, Fed Chair Jerome Powell said that “business debt has clearly reached a level that should give businesses and investors reason to pause and reflect.”  He pointed to corporate borrowing which hit record level of 35% of assets. And, he warned “another sharp increase…could increase vulnerabilities appreciably”.

Though, Powell also emphasized the debt problem is not at the level of systemic threat as the sub-prime mortgage markets. “As of now business debt does not present the kind of elevated risks to the stability of the financial system that would lead to broad harm,” he said.

Responding to some questions, Powell said “today’s inflation dynamics are very different from even 25 years ago. Globalization and technology may be playing a role”. Also, it was premature to make a judgement about the impact trade and tariff issues could have on monetary policy.

Powell’s speech on Business Debt and Our Dynamic Financial System.

Regarding market pricing of Fed’s rate cut, Atlanta Fed President Raphael Bostic told CNBC that “the market is ahead of where I am”. And, “I would say I’m not expecting a rate cut to be imminent, certainly not by September. Things would need to happen in order for that to play out.”

On inflation, Bostic noted “in general, my view is as long as we don’t see inflation running away, that would the sign that our policy is basically at a neutral level”., And, “we could sustain that for a long time and we don’t have to move.”

On the other hand, Bostic was also unconcerned with downward inflation pressure. He said “I’m not super-concerned about that today, and mainly it’s because when you look at inflation expectations, they haven’t started to trail away in a significant way away from our target”.

Nevertheless, he added, “if I started to see a trend moving away to one and a half or one and a quarter [percent] for inflation expectations, then I’d be concerned. But right now, I don’t see our lack of hitting that target … as being a material failure.”