Citing weak inflation expectations and weak economic reports, St. Louis Fed’s Bullard says expected rate hikes ‘aggressive’.
The Fed’s expected plans for rate increases may be too fast for an economy that has shown recent signs of weakness, St. Louis Federal Reserve President James Bullard said on Friday, making the case for a continued go-slow approach as inflation progress stalls.
A recent dip in inflation and inflation expectations means the Fed may not make as much progress as expected toward its inflation target, and at a time when risks are increasing that political gridlock in Washington will continue.
Expectations that tax, regulatory and other changes may boost growth have buoyed business confidence and markets since the start of the year, but are looking less likely as the Trump administration faces continued controversy.
Bullard said that recent events in Washington, on their own, have not changed his expectations for an economy anticipated to slog along at a 2 percent annual growth rate. But they have coincided with weaker inflation, and a dip in long-term bond yields that seem counter to the Fed’s faith it should continue to raise interest rates, Bullard said.
Inflation readings “are weak, they’ve come down and they are too low for the Fed to reach its inflation target,” Bullard said in comments at the Association for Corporate Growth. “They’ve gone in the wrong direction and a little bit too sharply for comfort.”
Fed Clueless
These continual debates show the Fed is clueless about where interest rates should be. Of course, that has long been proven given the dot-com and housing bubbles the Fed directly sponsored.
I don’t know where the rate should be and they don’t either. What I do know that they don’t is the Fed blew yet another bubble.
The current bubble is not related to technology or financials. It’s closer to an everything bubble.
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Mike “Mish” Shedlock
Who ordered the murder of Seth Rich?
The world wonders…..
All too obviously, he was murdered at the direction of the Democratic National Committee. The only question is who in the DNC leadership made the call.
WaPo and NYT, both former newspapers now relegated to unprofitable web pages, are desperate to avoid the fate of so many national political/business magazines — Businessweek, USNews, Forbes, etc.
Foreign sources continue to report about Seth Rich’s murder, and its starting to leak through to US media. That may be the thing that really scares the FBI and DC police more than anything else — they will have to admit the DNC / Hilary campaign were murdering people while Comey was preoccupied looking for Russian monsters under McCain’s bed.
Murders (Benghazi and Seth Rich), illegal and insecure email servers that the NSA told Hilary not to use, sexting underage girls (Huma Abadeen’s hubby), rigging polls and ballots to prevent Sanders from challenging Hilary, and those are just some of the crimes that leaked out despite the media’s efforts to censor.
Hilary belongs behind bars. Maybe Comey too (prosecutorial negligence?)
Perjury, at the least. Jimbo Comey has doubtless written a lot of memoranda regarding conversations with Loretta Lynch, Barack O’Bama, and Hillary Clinton over the years.
I wonder what’s in those memoranda?
Keep asking that question Tim.
Seth Rich’s murder demands his murderers be brought to justice.
RE: “rate hike exceptions as too aggressive, is he correct?” You bet he is. Just got out of a presentation by a member of the Federal Reserve. It was made quite clear the Fed is wanting 2% inflation (which their moneyed masters love so much). However the actual inflation rate for the past 2 years(?) has been virtually nil according to the Fed’s figures. (Actually – with the exception of a few bubbles, Mish is correct about the “deflation” that has been happening.)
Didn’t Bullard get the memo that the only reason for the hike is so rates can be lowered again?
Clearly markets believe him. As long as bond yields plunge every time stocks correct a bit, hard to imagine a reallly serious stock drop.
The Bullard Rally
A few years ago hinted at further QE … and, iirc, the largest 6 week rally in history followed.
When the banksters meet, I bet they still tip their hat at him.
All hail the Bullard
He’s not called “the BULL-ard” for nothing.
“A few years ago hinted at further QE … and, iirc, the largest 6 week rally in history followed”
It’s called stock market manipulation.
As for this rate “hike” nonsense….
Rates are going to get normalized whether the Fed likes it or not. Forcing rates below inflation (even if inflation is “only” 2.2%) is unnatural, and requires someone with credibility to continuously rig the interest rate market.
The Fed has lost credibility, which was its most valuable asset.
They are trapped & will be hoisted by their own petard.
Only hope is growth elsewhere (EU, Emerging) helps give some cover for rises for a while.
They will break something no matter what now. Break it sooner or break it later.
ZIRP/NIRP is breakage later, rises is breakage sooner.
Oh yeh, it is aggressive. Why not try raising by 0.1 or maybe 0.01 points?
Translation from Fed Speak: The yield curve is flattening, LIBOR rates, are rising and our foot is in our mouth.
They will get in one – maybe two – more 25bps hikes before the economy falls into full-blown recession.
By this time next year, they will have already un-done those hikes and be about to launch another round of QE. The 10-year Treasury yield will be somewhere in the neighborhood of 1.50%, and headed even lower.
That’s my two cents worth.
You have a real market only if the Fed boys’ mouths are kept stitched between meetings. Jawboning has become the in-thing when market looks like it is going to drop.
The market odds for a Fed hike is back above 70%. Hike is still game on.
Inflation readings “are weak, they’ve come down and they are too low for the Fed to reach its inflation target,” Bullard said in comments at the Association for Corporate Growth. “They’ve gone in the wrong direction and a little bit too sharply for comfort.”
For each action, there is an equal and opposite reaction. Boom ends in bust. Bubbles burst and deflate. Inflation and deflation complete a cycle.
This cycle has repeated over and over since Biblical times. Bullard is fighting a losing battle with the cycle. Math always wins.