WASHINGTON—Why did the Fed move to raise rates at its most recent meeting? Federal Reserve Bank of St. Louis President James Bullard has provided more context around the Federal Open Market Committee's approach to monetary policy and the economic outlook, noting that "U.S. monetary policy is considerably more accommodative today than it was as of late last year."
Bullard comments came in remarks to the National Economists Club here. As CUToday.info reported, the FOMC – for the first time in a decade – cut interest rates by 25 basis points during a meeting last week.
"President Bullard has been an influential voice in realigning the policy outlook for the FOMC since late last year," said NAFCU Chief Economist and Vice President of Research Curt Long, who attended the event. "However, his speech reflects a desire to let the most recent rate cut settle in before making another move. NAFCU continues to believe that the FOMC will not cut rates in September. If this is correct, we are likely to see a concerted campaign by Fed officials over the next six weeks to adjust market expectations."
Example Cited
Bullard used the two-year Treasury, which was trading to yield 2.98% in November 2018 compared to 1.72% last week, as an example of interest rates being "dramatically lower" today than toward the end of last year. He also acknowledged slower economic growth and increased uncertainties around trade, arguing that "U.S. monetary policy cannot reasonably react to the day-to-day give-and-take of trade negotiations."
"However, FOMC actions have also changed the outlook for shorter-term interest rates considerably over the last nine months, ultimately providing more accommodation to the economy," Bullard concluded.