“Assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals and gaining confidence getting back to 2-percent inflation…”
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Bullard’s remarks came a day after comments by Atlanta Fed President Lockhart who said not only does he not expect rate hikes to occur at every meeting, he also doesn’t rule out rate hike pauses from time to time. Mr. Williams is a closely watched policy maker who often signals the Fed’s consensus position on monetary policy. Central banks traditionally aim to cut interest rates below that level to stimulate their economies, but have less room to do so when the natural rate is low.
“We are going to return to an era where there is a bit more uncertainty about what the committee is going to do, meeting to meeting”, he said to reporters after a speech in Fort Smith on Friday.
Williams also said data have been consistent with “core measures of inflation having stabilised and maybe even starting to firm up some”. He described those developments as encouraging signs.
The minutes showed that Fed officials debated whether to insert the “next meeting” phrase into the statement.
The wording in the October statement marked the first time in seven years of ultra-low rates that Fed had ever suggested that it might raise rates at its next meeting.
Last week, government data showed New Zealand producer prices rose in the September quarter, with output prices increasing at a slower pace than input prices as manufacturers were hit by higher import costs from a weaker currency.
“You could think about keeping a permanently higher balance sheet, lowering the term premium and therefore actually raising the natural rate of interest in the economy”, Williams said.
“The economy is going to go into a boom period”, Bullard said, citing the low US unemployment rate, which is now 5 percent. As a result, the central bank needs to consider possible alternative tools or other solutions, he said.
“What I have said, and I still hold to this, is it was a close call”, Mr Williams said of the bank’s decision to hold rates steady at its October meeting. He added, “We need to think more about whether going to negative interest rates gives us more room”.
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I believe the continuation of 2-2.5% GDP growth is our best case scenario under such debt burdens, and thus continue to believe in the U.S. dollar, and the total return potential, and safety of principle in zero coupon US Treasury securities for the majority of our portfolio. The role of fiscal and structural policies, he said, should be seriously considered as well.
