In a low-safe-real-interest-rate environment and with the question of how the Trump administration's policies will play out, the Federal Open Market Committee doesn't need to raise rates aggressively, Federal Reserve Bank of St. Louis President James Bullard said late Tuesday.
"I wouldn't see any reason to be especially aggressive about hikes in this environment," he told reporters after a speech in Washington, D.C., according to published reports.
Bullard sees one rate hike this year and a March hike could signal a faster pace of increases this year "and it's not clear to me where the committee will come down on that."
In his speech, Bullard said the low-safe-real-rate environment is a "global phenomenon" that has been building for years, which "suggests that the regime will not go away naturally—therefore, a relatively low policy rate will remain appropriate."
As for the Fed's balance sheet, he suggested, ending reinvestment. "Ending balance sheet reinvestment may allow for a more natural adjustment of rates across the yield curve as normalization proceeds and for 'policy space' in case balance sheet policy is required in a future downturn," Bullard said.
