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Search Site Home > Newsroom > St. Louis Fed's Bullard: A Low In ation Surprise for U.S. Monetary Policy 8/7/2017 NASHVILLE, Tenn. – Federal Reserve Bank of St. Louis President James Bullard gave remarks on “A Low In ation Surprise for U.S. Monetary Policy” at the 2017 conference of America’s Cotton Marketing Cooperatives on Monday. After providing a brief background on the Federal Reserve, including its decentralized structure and the role of the Federal Open Market Committee (FOMC), Bullard noted that the FOMC’s goals include good labor market performance and an in ation target of 2 percent. “Financial stability is sometimes considered as an additional goal, but can be For media inquiries contact: Laura Girresch mediainquiries@stls.frb.org O ce: (314) 444-6166 Cell: (314) 348-3639 James Bullard St. Louis Fed President and CEO more directly addressed through regulatory policy. This remains a hot topic,” he said. He then turned to some key aspects of today’s macroeconomic situation. In particular, he examined the low-growth regime in the U.S. since the recession. He also discussed recent in ation outcomes, which he said “have been unexpectedly low,” and their connection to global commodity markets. In addition, he looked at whether the low U.S. unemployment rate means that in ation is about to increase substantially. Regarding the global economy, he discussed the impact of upgrades to the global growth outlook on the U.S., speci cally implications for the value of the U.S. dollar. Bullard also addressed what the current macroeconomic situation means for the policy rate (i.e., the federal funds rate target). “The current level of the policy rate is likely to remain appropriate over the near term,” he said. Low growth James Bullard is president and chief executive o cer of the Federal Reserve Bank of St. Louis. In these roles, he participates in the Federal Open Market Committee (FOMC) and directs the activities of the Federal Reserve’s Eighth District. President's Website Speeches & Presentations Video Appearances In looking at U.S. economic growth, Bullard said data since the nancial crisis suggest that the U.S. has converged to real GDP growth of 2 percent, which is slow by historical standards. “Second-quarter real GDP growth showed some improvement from the rst quarter, but not enough to move the U.S. economy away from a regime characterized by 2 percent trend growth,” he said. Real GDP grew at an annual rate of 1.9 percent in the rst half of 2017. “The 2 percent growth regime appears to remain intact,” he added. Low in ation Turning to in ation, Bullard noted that the U.S. in ation rate has been below the FOMC’s 2 percent in ation target since 2012. “Recent in ation data have surprised to the downside and call into question the idea that U.S. in ation is reliably returning toward target,” he said. He also examined several in ation measures that try to control for Media Interviews Research Papers particularly volatile movements in individual prices and noted that those readings have been lower this year. Bullard added that global commodity prices have been an important factor affecting U.S. headline in ation. “Crude oil prices, in particular, tend to in uence the headline in ation rate,” he said, adding that global commodity prices are sensitive to perceived and actual supply and demand developments in the global crude oil market. Another factor may be the nancialization of global commodity markets in recent years, which may have made many commodities more highly correlated with oil prices than they otherwise would have been, Bullard noted. Better global growth prospects Turning to global growth, Bullard noted that the International Monetary Fund upgraded its world economic outlook for 2017, with key upgrades for Japan, Europe and China. “The value of the U.S. dollar has declined in 2017, a consequence of the brighter growth outlook for Europe and expectations for a somewhat more hawkish European Central Bank,” he added. Relationship between unemployment and in ation Bullard noted that recent labor market outcomes have been relatively good and discussed the question of whether the low U.S. unemployment rate—at 4.3 percent in the July reading—might signal a substantial rise in in ation. “The short answer is no, based on current estimates of the relationship between unemployment and in ation,” he said. “Even if the U.S. unemployment rate declines substantially further, the effects on U.S. in ation are likely to be small.” To sum up, given that recent data indicate that real GDP growth remains consistent with the low-growth regime of recent years; that U.S. in ation has surprised to the downside in recent months and that low unemployment readings are probably not an indicator of meaningfully higher in ation over the forecast horizon, he concluded, “The current level of the policy rate is appropriate given current macroeconomic data.” GENERAL Home About Us Bank Supervision Careers Community Development Economic Education Events Inside the Economy Museum Newsroom On the Economy Blog Open Vault Blog OUR DISTRICT Little Rock Branch Louisville Branch Memphis Branch Agricultural Finance Monitor Housing Market Conditions SELECTED PUBLICATIONS Bridges Economic Synopses Housing Market Perspectives In the Balance Page One Economics The Quarterly Debt Monitor Review Regional Economist ST. 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