Need one rates hike to reach neutral.
- New fiscal, tax and regulatory policies in Washington could make United States a higher speed economy IF they improve productivity
- Any policy changes it should not be viewed as needed stimulus since the economy is not in recession
- impact on current low growth, low interest rate regime depends on proper execution and focus on productivity improvements
- absent such changes Bullard says economy needs only one rate hike to reach a neutral rate
- sees one rate hike as appropriate because unemployment and inflation are close to target
- says impact of other issues like trade and immigration are only likely to be felt in the longer run
- inflation close to target net of commodity effects
- US in a low productivity – growth regime
- expects policy rates remain exceptionally low
- Hard for US alone to break low interest rate trend
Bullard has been known to change with the wind. His last push has been one focused on "one and done". That is coming not far from the time when the other Fed officials see multiple hikes in 2017. Of course that has been the pattern for the Fed over recent memory - expect 2-3 or more hikes in the year and lucky if you get one. So Bullard is taking the "I don't believe the 2H growth bait" this year. Time will only tell if we get the traditional slowdown in the new year scenario.
