Bullard: Rates Can Stay Low

While the Federal Reserve waits to see how fiscal policy will change, the fed funds rate target can stay low because real GDP growth and the real interest rate remain subdued, Federal Reserve Bank of St. Louis President James Bullard said Friday.

"The U.S. economy has arguably converged to a low-real-GDP-growth, low-safe-real-interest-rate regime," Bullard told the Economic Club of Memphis, according to text released by the Fed. With those conditions  not likely to change this year, "the Fed's policy rate can remain relatively low while still keeping inflation and unemployment near goal values."

Bullard said the time may be right for the Federal Open Market Committee to end reinvestment so the Fed's balance sheet starts to normalize. "Ending balance sheet reinvestment may allow for a more natural adjustment of rates across the yield curve as normalization proceeds," he said.

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