The economy will “probably not” rebound in the last half of 2017, according to Federal Reserve Bank of St. Louis President James Bullard, and don’t expect inflation to suddenly turn around either.

Federal Reserve Bank of St. Louis President James Bullard.
Federal Reserve Bank of St. Louis President James Bullard. Bloomberg News

As such, the current federal funds rate target “is likely to remain appropriate over the near term,” Bullard said in a speech at Truman State University on Wednesday, according to materials released by the Fed.

“Inflation data during 2017 have surprised to the downside and call into question the idea that U.S. inflation is reliably returning toward target,” he said, adding he doesn’t expect a reversal this year.

“Second-quarter real GDP growth showed some improvement from the first quarter, but not enough to move the U.S. economy away from a regime characterized by 2 percent trend growth,” he added.

While the prospect of 3% GDP growth appeared during the summer weaker data and major hurricanes combined to lower expectations. While growth resulting from repairing hurricane-related damage should boost the economy in the fourth quarter, Bullard suggested it wouldn’t be enough to propel GDP for the second half of the year much higher than 2%.

Despite a low unemployment rate and employment growth beyond expectations, he dismissed the possibility that will fuel inflation. “The short answer is no, based on current estimates of the relationship between unemployment and inflation,” Bullard said. “Even if the U.S. unemployment rate declines substantially further, the effects on U.S. inflation are likely to be small.”

Bullard is not a voter on the Federal Open Market Committee this year or next.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.
Gary Siegel

Gary Siegel

Gary Siegel has been at The Bond Buyer since 1989, currently covering economic indicators and the Federal Reserve system.