Comments by St Louis Fed president James Bullard
- There is no need to take on the yield curve
- The Fed needs to be very careful
- Market outlook is flattening the yield curve
- US economy is having a good year
- But things may slow in 2019, 2020
- Sees long-term potential growth around 2%
- Can adjust policy if growth is faster than expected
- Sluggish productivity is hampering wage growth
- Does not see much inflation pressure in the US
- Fed is focused on its legal mandate from Congress (a jab at Trump)
- The market is more dovish than the Fed
All the economy stuff is very much a given at this point. The takeaway is that there is continued talk of the potential (more like inevitable) inversion of the yield curve.
While Bullard is not a voting member this year, the sentiment seems to be growing that the Fed may be watching the yield curve more closely than it would like - and that could cause some discussions/rethink in the tightening cycle possibly.
The 2s-10s spread is sitting at about 20 bps currently:
