Tags: federal reserve | bullard | interest rates | bubbles

Fed's Bullard: Higher Rates Needed to Guard Against Bubbles

Tuesday, 30 June 2015 06:07 PM

Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank may need to raise interest rates higher than otherwise to prevent the emergence of asset-price bubbles.

“The Fed should hedge against the possibility of a third major macroeconomic bubble in the coming years by shading interest rates somewhat higher than otherwise,” Bullard said in remarks prepared for delivery at an event in St. Louis. “The benefit would be a longer, more stable economic expansion.”

Some investors are betting international turmoil, including the possibility of a Greek exit from the euro, could be a reason for the Fed to put off a rate increase this year.

The policy-setting Federal Open Market Committee left rates near zero at its meeting on June 16-17 and signaled that recovering growth would probably warrant raising rates later this year, though the pace of subsequent increases is likely to be gradual. Officials next meet July 28-29.

Bullard didn’t discuss international events in his prepared remarks, which focused on the role of startups in creating jobs and a warning about asset prices.

The ratio of wealth to disposable income is at a “high level,” Bullard said, and technology company stocks are “near a high in real terms,” while equity valuations are “relatively high.” At the same time, he said there were differences with the 1990s tech-stock bubble as more technology companies now have “actual earnings.”

Bullard, who next has a vote on FOMC policy in 2016, has been president of the St. Louis Fed since 2008. His district includes all of Arkansas and parts of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.


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Federal Reserve Bank of St. Louis President James Bullard said the U.S. central bank may need to raise interest rates higher than otherwise to prevent the emergence of asset-price bubbles.
federal reserve, bullard, interest rates, bubbles
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2015-07-30
Tuesday, 30 June 2015 06:07 PM
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