The Federal Reserve may need to cut interest rates soon to prop up inflation and counter downside economic risks from an escalating trade war, St. Louis Fed President James Bullard said.
“A downward policy rate adjustment may be warranted soon to help re-center inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown,” Bullard said Monday in remarks prepared for a talk in Chicago. “The direct effects of trade restrictions on the U.S. economy are relatively small, but the effects through global financial markets may be larger.”
Bullard’s comments mark the first time a Fed official has publicly suggested the need for a rate cut since the central bank put rates on hold in January when it pledged to be “patient” as it weighed headwinds from slower global growth and the fallout from the trade war.
(Read more: Bloomberg)