St. Louis Fed Bullard Repeats: Be Cautious in U.S. Rate Hikes

     TOKYO (MNI) - St. Louis Federal Reserve Bank President James Bullard

Thursday repeated his view that the Federal Reserve Board must be caution in

raising interest rates, even though data indicate the U.S. economy is "in good

shape" at this point.

     He cited as three reasons to be cautious: inflation expectations are low,

the Fed policy rate appears to be neutral and the U.S. nominal yield curve could

invert later this year or early next year, which would be a bearish signal for

the U.S. economy.

     It is hard to expect bond yields to rise much more without seeing much

higher inflation expectations, he told a group of market participants at an

MNI-Market News seminar.

     The Fed has substantially normalized its monetary easing policy, he said.

     Earlier this week, Bullard told a conference in Tokyo that the Fed's

current target range of 1.5% to 1.75% was "already pushing against the upper

bound of the neutral level today."

     Bullard, who does not vote on rates this year, also said the U.S. could

allow more immigration to help support labor force growth, which has slowed in

recent years.

     "Strategic immigration practiced by Canada and Australia appears to be a

very logical policy to me," he said.

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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