St. Louis Fed President James Bullard said today that interest rates may have already reached the so called “neutral” level. Beyond this point, monetary policy will become restrictive. And Bullard said that there are “reasons for caution in raising the policy rate further given current macroeconomic conditions.”
At the same time, Bullard pointed to market-based inflation expectations and said investors “believe there is currently little inflationary pressure in the U.S.” Thus, leave interest rates unchanged would “re-center inflation expectations at the target.”
