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Search Site Home > Newsroom > St. Louis Fed's Bullard: Three Questions for U.S. Monetary Policy 9/27/2017 KIRKSVILLE, Mo. – Federal Reserve Bank of St. Louis President James Bullard gave remarks on “Three Questions for U.S. Monetary Policy” at Truman State University on Wednesday. In his talk, he discussed the current slow-growth regime in the U.S. He also discussed in ation, which he said “has surprised to the downside this year.” In addition, he looked 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 at U.S. labor market performance, which has been good. He explained that this macroeconomic situation suggests the current level of the policy rate (i.e., the federal funds rate target) “is likely to remain appropriate over the near term.” In this context, Bullard posed these three questions: Is U.S. economic growth poised for a rebound in the second half of 2017, as compared to the rst half? Is the downside in ation surprise in the rst half of 2017 likely to reverse in the second half of 2017? Will continued strong performance of U.S. labor markets put upward pressure on in ation? His response to all three: “Probably not.” Will real GDP growth be higher in the second half of 2017? 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. “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 2.1 percent in the rst half of 2017. “The 2 percent growth regime appears to remain intact,” he added. Bullard noted that there was some hope during the summer that the second half of 2017 would see faster growth, perhaps at a 3 percent pace. However, he explained, two developments have dampened those hopes. First, some macroeconomic data came in weaker than anticipated. Second, major hurricanes caused substantial damage in some parts of the country. Although the economy should rebound somewhat in the fourth quarter as hurricane damage is repaired, Bullard noted, it probably won’t be signi cant enough to move 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 Media Interviews Research Papers second-half real GDP growth meaningfully above 2 percent. Will the low-in ation trend reverse itself? Turning to in ation, Bullard noted that the U.S. in ation rate has been below the Federal Open Market Committee’s 2 percent in ation target since 2012. “In ation data during 2017 have surprised to the downside and call into question the idea that U.S. in ation is reliably returning toward target,” he said, adding that the current low-in ation trend will probably not reverse this year. Are U.S. labor markets signaling a meaningful rise in in ation? Bullard noted that the unemployment rate is relatively low, and the pace of employment growth has met or exceeded expectations in recent months. He explained that these are sometimes cited as factors that will eventually drive the in ation rate higher. He discussed the question of whether the low U.S. unemployment rate—at 4.4 percent in the August 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.” In returning to his three initial questions on real GDP growth, in ation and labor market performance, Bullard summarized his points. “Recent data indicate that U.S. real GDP growth remains consistent with the low-growth regime of recent years,” he said, although he noted that hurricane effects will add uncertainty to the interpretation of macroeconomic data in the months ahead. On in ation, he said, “U.S. in ation has surprised to the downside in recent months, and the surprise is unlikely to reverse during 2017.” In addition, he noted that “low unemployment readings are probably not an indicator of meaningfully higher in ation over the forecast horizon.” Given these factors, Bullard 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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