James Bullard, president of the Federal Reserve Bank of St. Louis and a voting member of the FOMC said that it would be prudent to edge interest rate higher.
Speaking in Germany, he affirmed that inflation and employment goals have essentially been met, justifying that it would be prudent to move toward higher interest rates.
“In the U.S., Bullard said that the key argument for monetary policy normalization is that while the goals of the Federal Open Market Committee (FOMC) have essentially been met, policy settings remain extreme. Regarding the FOMC’s goals, he noted that U.S. labor markets are close to normal and that inflation net of the oil price shock is reasonably close to the FOMC’s target rate of 2 percent. In contrast, the policy rate (currently at a target range of 0.25-0.50 percent) remains about 3 percentage points below the FOMC’s long-run level, and the Fed’s balance sheet remains more than $3.5 trillion larger than its pre-crisis level”, said the St. Louis FED in a statement.
“Prudent policy suggests edging the policy rate and the balance sheet toward more normal levels,” said Bullard.
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