Fox Business Channel: Fed's Bullard Wanted Bigger Rate Cut Because US Manufacturing 'Appears in Recession'

September 20, 2019

Article by Jonathan Garber in Fox Business Channel

St. Louis Fed President James Bullard is worried about an economic slowdown and thinks the Federal Reserve should have cut rates by a bigger margin.

Bullard was one of three monetary policy committee members who voted against a 25 basis-point reduction in rates at Wednesday’s Fed meeting, but the only official who thought the central bank should have been more aggressive.

“There are signs that U.S. economic growth is expected to slow in the near horizon,” he said in a statement on Friday.

“Trade policy uncertainty remains elevated, U.S. manufacturing already appears in recession, and many estimates of recession probabilities have risen from low to moderate levels. Moreover, the yield curve is inverted, and our policy rate remains above government bond yields for nearly every country in the G-7.”

The U.S. economy grew at a 2 percent annualized rate in the second quarter, down from 3.1 percent in the January-to-March period. Recession fears were stoked further in recent weeks when the spread between the U.S. 2-year and 10-year yields turned negative for the first time in over a decade.

Yields typically are larger for longer-term notes, since future conditions are more difficult to predict; a switch signals buyers are more worried about the economy in the present.

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