Bullard on rates

  • Would like to cut by 25 bps (not 50 bps)
  • A 25 bps cut would give the Fed optionality for later in the year
  • Too-slow inflation response would be reason to cut further, along with worse outcomes on trade war
  • Rate cut now would be pre-emptive
  • No need to revisit timing on balance sheet runoff
  • Wants to see upward-sloping yield curve
  • Fed not on a pre-set course
  • It would be difficult for the Fed not to ease July 31 at this point

Fed officials have characterized a cut as 'strategic' and 'pre-emptive' now along with mentioning 'insurance'. The market continues to price in a rate-cutting cycle.

In a sense, Bullard is right because it will all come down to how the trade war goes.