The president of the Federal Reserve Bank of Saint Louis, James Bullard, said that the recente sharp drop in bond yields will ease headwinds for the US economyand derived from the recent turmoil in the banking sector.
Bullard noted Thursday in a presentation that 10-year US Treasury yields have fallen 50 basis points in recent weeks, and 100 basis points in the case of two-year bonds.
“This may help mitigate some of the negative macroeconomic fallout that might otherwise occur after a period of financial stress,” Bullard said in remarks prepared to be delivered at an event in Little Rock, Arkansas, hosted by the Arkansas State Bank Department. .
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“LFinancial conditions have tightened”, Bullard said. “However, financial stress and financial condition metrics today remain low compared to levels seen during the 2007-2009 global financial crisis.”
Bullard does not have a vote on monetary policy decisions this year.
Fed policymakers raised interest rates by a quarter of a percentage point last month, continuing their aggressive year-long campaign to curb price pressures, despite concerns about financial stability following the second-biggest banking collapse in the history of the United States.
“Continued appropriate macro prudential policy can contain financial stress, while appropriate monetary policy can continue to put downward pressure on inflation,” Bullard said.
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With this measure, the policy rate is currently between 4.75% and 5%, compared to the level close to zero of the previous year. Forecasts released at the same time showed the 18 officials expected rates to reach 5.1% by the end of the year, based on the median of their projections, implying yet another rise in interest rates.
Monetary policy makers have said since the meeting that they are awaiting economic data to determine to what extent recent banking tensions may restrict access to credit or slow down the economy.
Bullard said last month that his forecast was for rates to peak at 5.625% this year. The next monetary policy meeting will be held on May 2 and 3.
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