MNI POLICY: Fed's Bullard: Rate Cut Depends on Data

By Jean Yung

     WASHINGTON (MNI) - U.S. growth and inflation indicators would need to

deteriorate relative to the Fed's forecasts for officials to consider an

interest rate cut, Federal Reserve Bank of St. Louis President Jim Bullard said

Thursday, adding that he's uncertain about the economy's performance so far this

year. 

     His remarks come on the heels of Wednesday's publication of the minutes of

the FOMC's March meeting, in which a majority of officials said the current

level of rates appear to be appropriate for the rest of the year. 

     "The (Summary of Economic Projections) is essentially saying if the economy

evolves as expected, we would not make any changes in 2019," Bullard told

reporters after giving a speech in Tupelo, Miss. "So you're going to need to see

deviations on the downside on inflation or the economy, or both." 

     Following are other major takeaways from his Q&A with media: 

     --First-quarter data has indicated a slowdown relative to 2018, but Bullard

said he would need more time to understand what's going on in the economy.

     --Bullard advocated replacing the Fed's "patient" guidance with neutral

language relatively soon as patience implies the Fed plans to continue raising

rates back to a "normal" level on the back of favorable data. "I think that

'patient' connotes that we're still on track to some kind of normalization

program, and I don't really think we are," he said. "We should give more neutral

language." 

     --He would like to improve the SEP and dot plot to maintain transparency

but allow the Fed to be more flexible and less committed to rate projections. He

said the FOMC "felt compelled to follow through" on the December hikes because

of its dot plot, despite a weaker outlook. 

     --He supports allowing reserves to continue to shrink after September,

"gently exploring" the level of reserves demand by banks. 

     --Yield curve flatness puts the economy in a worrisome situation, but he's

hopeful that better data will help steepen the curve.

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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