St. Louis Fed’s Bullard Discusses Recent Developments in U.S. Monetary Policy

Federal Reserve Bank of St. Louis President James Bullard

Federal Reserve Bank of St. Louis President James Bullard addressed “Recent Developments in U.S. Monetary Policy” during his presentation at an event hosted Friday by the Association for Corporate Growth at Washington University in St. Louis.

Bullard explained that U.S. macroeconomic data since the March 2017 meeting of the Federal Open Market Committee (FOMC) have been relatively weak, on balance. For instance, he noted that U.S. inflation and inflation expectations have surprised to the downside in recent months.

In discussing the FOMC’s March increase in the policy rate (i.e., the federal funds rate target), he noted that the financial market reaction has been the opposite of what would typically be expected. “This may suggest that the FOMC’s contemplated policy rate path is overly aggressive relative to actual incoming data on U.S. macroeconomic performance,” he said.

With the U.S. unemployment rate at 4.4 percent, Bullard also examined the relationship between unemployment and inflation and whether the current low unemployment rate may signal a meaningful increase in inflation. “Low unemployment readings are probably not an indicator of meaningfully higher inflation over the forecast horizon,” he said.

In explaining these points, Bullard explored the following topics:

Recent Economic Growth in the U.S.

He said that real GDP growth, as measured from one year earlier, has averaged just 2.1 percent over the last seven years and that the last two years have shown very little change. “A natural conclusion is that the economy has converged upon a growth rate of about 2 percent,” he said, adding that the U.S. economy is not likely to move meaningfully off of this…

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