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.