Friday 29 Mar 2024
By
main news image

SINGAPORE (May 26): Interest rate normalisation could take place in the months ahead, given that the Federal Open Markets Committee’s assessment of the US economy is more bullish than the market.

That was the suggestion given by James Bullard, president of the St Louis Federal Reserve, when he spoke at a conference in Singapore organised by DBS Bank on Thursday.

Bullard said the health of the US labour market is a stronger factor to consider than GDP growth when setting fiscal policy.

Employment performance in the US has already been very strong recently and no further improvement is needed given that the market is already fully employed.

And if rates remain too low for too long, the danger of it feeding into an asset price bubble while moderate for now, will get more severe going forward, he added.

On global risks, Bullard said concerns over the impact of Brexit on the market are overblown and while risks in China remained, this should not deter the Fed from its plans to raise rates over the next few years.

Bullard also said the divergence in G3 monetary policies are well priced in, and that markets would require a surprise — such as a larger than expected policy loosening from the ECB or BoJ or sooner than expected Fed rate hike — to push the US dollar up further.

      Print
      Text Size
      Share