Fed's Bullard: Low rates will likely be the norm for the next two to three years
Low interest rates will likely be the norm during the next two to three years, James Bullard, president of the Federal Reserve Bank of St. Louis and a voting member of the Federal Open Market Committee, said in prepared remarks on Monday.
The U.S. is in a low-productivity growth regime, which is pressuring real safe rates of return, he said.
With real safe rates of return exceptionally low and not expected to rise soon, interest rates should be expected to stay exceptionally low during the forecast horizon, he said.
Bullard's comments come one month after he voted against hiking the federal funds rate. The Fed continues to grapple with deciding when it will increase rates from the current target range of 0.25 to 0.50 percent. The last time the Fed raised rates was in December 2015, when it did so for the first time in nine years.
Fed’s Evans sees three interest-rate hikes by end of 2017
The Federal Reserve is likely to raise short-term interest rates by three quarter-point moves between now and the end of 2017, said Chicago Fed President Charles Evans Monday.
With GDP expected to be 2%-2.5% in the second half of the year, and growth of 2%-2.5% next year, “I suppose I’ve got, hard to say, three [interest-rate hikes] priced in by the end of next year,” he told reporters after a speech in Chicago.
Asked if any of his predicted three rate hikes by end 2017 will happen before the end of this year, Evans said “prognosticating is very challenging” when narrowing down expected rate hikes to particular months, but he didn’t exclude the upcoming November, December or January meetings for action.
Fed is trying to make policy as predictable as possible: Williams
The Federal Reserve is trying to make policy as predictable as possible so as to minimize outsized effects on international financial markets, San Francisco Fed President John Williams said on Friday.
Williams also said he expects the Fed to allow its balance sheet to shrink only after rates are "well away" from zero, and that eventually it will be a lot smaller than the current $4.5 trillion. Even so, he said, it is unclear whether a smaller balance sheet will result in a much steeper yield curve because of global headwinds and other factors that are pushing down on long-term rates more than in the past.
Evans said the Fed should tie the pace of future interest-rate hikes to progress on inflation.
The U.S. central bank needs to “demonstrate commitment to achieving the inflation target sustainably, symmetrically, and sooner rather than later,” Evans said in a speech to the University Club in Chicago.
This might require undershooting the unemployment rate and overshooting the 2% inflation target, Evans said.
Inflation, as measured by the Fed’s favorite measure — the personal consumption expenditure index — has mostly been below the Fed’s 2% target since the global economic downturn.
Oil prices dipped on news of the impending restart of Britain's Buzzard oilfield and Iraq's wish to be exempted from OPEC production cuts.
U.S. West Texas Intermediate (WTI) crude CLc1 fell 33 cents, or 0.7 percent, to settle at $50.52.
Brent LCOc1 was down 30 cents at $51.48 a barrel while U.S. crude CLc1 lost 9 cents to $50.43.
Reference: Moneymorning, Reuters, CNBC
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