The Federal Reserve may have to cut interest rates again due to a slowdown in global growth and signs that Fed policy "may be too restrictive," St. Louis Fed President James Bullard said Sept. 23.
Bullard, who voted against the Fed's Sept. 18 rate cut in favor of more aggressive easing, did not explicitly say in prepared remarks whether he would favor lowering rates again this year. But he pointed to several downside risks facing the U.S. economy, including ongoing trade tensions, softer global growth and contractions in U.S. and global manufacturing data.
A "sharper-than-expected slowdown may make it more difficult" for the Federal Open Market Committee to achieve its 2% goal, he said in an appearance in Effingham, Ill.
"The FOMC may choose to provide additional accommodation going forward, but decisions will be made on a meeting-by-meeting basis," he said.
While Fed officials "cannot reasonably react to the day-to-day give-and-take of trade negotiations," the uncertainty is expected to continue to dampen the appetite for global investment, he said. Signs of weaker global growth, including an inverted yield curve, seem to "suggest U.S. monetary policy may be too restrictive for the current environment."
Bullard has been among the more dovish voices at the Fed, where officials have been split over their next move after cutting rates twice this year. The Fed's dovish turn this year means that its monetary policy stance is "considerably more accommodative today than it was as of late last year," when the central bank raised its benchmark rate and penciled in more tightening for 2019.
Some at the Fed have opposed easing policy, saying the economy has continued to perform well despite increased risks to the outlook. That cohort includes Boston Fed President Eric Rosengren and Kansas City Fed President Esther George, both of whom voted against the Fed's Sept. 18 decision.
In a separate appearance on Sept. 23, San Francisco Fed President Mary Daly said she supported the Fed's rate cuts in July and September. While the U.S. economy is in a healthy position and consumer spending has continued to strengthen, slower global growth and trade uncertainty are making businesses more wary about future investments, she said.
Those headwinds will dampen the U.S. economy's momentum, and the Fed "can and should offset that" with lower interest rates that will support growth in other sectors, Daly said at an event in Salem, Ore.
Daly does not vote on the FOMC this year and will rotate into a voting spot in 2021.
