ST. LOUIS Feb 9 U.S. interest rates can likely
remain low through at least 2017, with no clear sense yet of
whether the new Trump administration's policies will touch off
higher inflation or growth, St. Louis Federal Reserve Bank
President James Bullard said on Thursday.
Bullard has said that the current target rate of between 0.5
percent and 0.75 percent is roughly appropriate for an economy
stuck in a low-growth, low-inflation rut.
That situation "has been many years in the making and is
unlikely to turn around quickly," Bullard said in morning
remarks at Washington University in St. Louis. "A relatively low
policy rate will remain appropriate."
Despite administration talk of large tax cuts and
infrastructure spending, actions that could stoke inflation in
an economy considered near full employment, Bullard said
inflation expectations remain low.
"It does not appear that undue inflationary pressure is
building so far," Bullard said.
The Fed raised its policy rate in December, the second such
move in two years. That glacial pace is expected to accelerate
this year. Policymakers are eager to move as far as possible
from the zero lower bound hit during the financial crisis, and
the economy is near the Fed's goals of two percent inflation and
But the election of U.S. President Donald Trump has
presented both positive and negative risks. The prospect of a
fiscal and tax push could boost inflation and prompt the Fed to
move faster, but Trump's approach to immigration and trade run
counter to what central bankers feel the economy needs to become
more productive in the long run.
Bullard said it will not be clear how those forces play out
until at least next year.
"Whether the new administration's policies represent a
'regime shift' depends on whether these policies will have a
sustained impact on productivity," Bullard said.
(Reporting by Howard Schneider; Editing by Meredith Mazzilli)