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”.