With inflation expectations falling, it would be "unwise" to keep raising the fed funds rate target, Federal Reserve Bank of St. Louis President James Bullard said Wednesday night.
"I regard it as unwise to continue a normalization strategy in an environment of declining market-based inflation expectations," Bullard told the Money Marketeers of New York University, according to a release by the Fed. "A decline in inflation expectations represents an erosion of central bank credibility with respect to the inflation target."
The Federal Open Market Committee's plan for normalizing monetary policy are based on stable inflation expectations, he said, and with "renewed downward pressure" on these projections, the strategy is in question.
Another change that should give the FOMC pause is a lower possibility of asset price bubbles.
Bullard suggested the FOMC may rethink policy rate projections in the Summary of Economic Projections (SEP) "to better align market expectations of future policy moves."
