St. Louis Fed President James Bullard just described current interest rate as “a little bit restrictive” after that rate hike in December. And, to him, Fed is now “putting downward pressure rather than upward pressure on inflation”. And that could drag core inflation further below Fed’s 2% target. Thus, he expects Fed to miss inflation target again in 2019.
Further, Bullard warned that “I do think it has damaged us to have continually missed on the low side.” Thus, Fed has too “tread carefully” this in regarding interest rate decisions.
According to Fed’s own December projections, the longer run federal funds rate sat at 2.5-30% (central tendency) and 2.5-3.5% (range). Current federal funds rate is at 2.25-2.50%, which is still below the long running range.
