REPEAT: MNI POLICY: Fed's Bullard Warns on Slowdown Risks

Repeats Story Initially Transmitted at 17:41 GMT Jan 10/12:41 EST Jan 10

By Jean Yung

     WASHINGTON (MNI) - Tepid inflation and warning signs from markets on risks

of a U.S. recession and global slowdown argue for the Federal Reserve to

"moderate its normalization campaign," St. Louis Fed President Jim Bullard said

Thursday in a speech to the Little Rock Regional Chamber of Commerce. 

     Bullard has argued for months that no more interest rate increases are

necessary with inflation below target for seven straight years. This year,

Bullard rotates into a voting position on the FOMC. 

     "The FOMC has already been sufficiently pre-emptive over the last two years

to contain upside inflation risk," Bullard said. 

     The prospect for a further global growth slowdown is tangible, Bullard

said, citing data from China in particular. Chinese industrial production growth

is slowing, as is retail sales growth and investment, he said. 

     In the United States, the Treasury yield curve is close to inversion, a

phenomenon historically associated with recessions. If that materializes, it

would send a bearish signal for the U.S. economy, he said. 

     Despite the U.S. economy outperforming expectations in the past two years,

actual inflation has remained subdued, and markets are not expecting it to rise.

     The FOMC "should heed these important signals in order to keep the U.S.

expansion on track for the next several years," he said. 

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