Investing.com – Federal Reserve (Fed) Bank of St. Louis president James Bullard reiterated his call for monetary policy to remain accommodative with just one rate hike over the next three years.
In a speech titled “Safe Real Interest Rates and Fed Policy” and delivered Thursday at the Commerce Bank Annual Economic Breakfast, Bullard explained that the model he used indicated that interest rates should remain accommodative.
“Because unemployment and inflation are relatively close to their long-run values, the recommended policy rate from a Taylor-type rule depends mostly on the safe real rate of return,” he said.
The Fed’s target rate is currently situation in a range of 0.25% to 0.50%, placing it effectively at 38 basis points, which Bullard considered to “be extraordinarily low by postwar historical standards”.
While the Fed is considering increasing the price of money, Bullard admitted that his outlook for the path of interest rates was flatter than the rest of the Committee.
“I conclude that a single 25-basis-point increase in the policy rate—from 38 to 63 basis points—will get us very close to the recommended Taylor rule value over the forecast horizon,” Bullard said.
The St. Louis Fed chief summed up his own speech at the beginning of his intervention: “Low interest rates are likely to continue to be the norm over the next two to three years.”
Markets are currently expecting the Fed to hike rates by 25 basis points at the December 13-14 meeting with odds standing at 81.1%, according to Investing.com’s Fed Rate Monitor Tool.