Federal Reserve

Bullard: Recent ‘very substantial’ oil moves have implications for Fed action

Fed's Bullard: Recent oil price movements 'very substantial'
Fed's Bullard: Recent oil price movements 'very substantial'

The latest plunge in crude prices has implications for monetary policy in the United States, a top Federal Reserve official said Thursday.

St. Louis Fed President James Bullard — a voting member of the central bank's policymaking committee — said in a speech the recent movement in oil prices has been "very substantial."

Federal Reserve Bank Chair Janet Yellen holds a news conference where she announced that the Fed will raise its benchmark interest rate for the first time since 2006 at the bank's Wilson Conference Center December 16, 2015 in Washington, DC.
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U.S. crude futures have fallen nearly 17 percent this year and briefly dipped below $30 a barrel earlier this week. Bullard also said it could take longer than expected for the oil market to stabilize, but added that low prices are a "net positive" for the economy.

"Once oil prices stabilize, headline inflation should return to the Federal Open Market Committee's inflation target of 2 percent, although it may take longer than previously thought," he said.

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He also said U.S. inflation expectations are falling, and that is worrisome. "Low inflation expectations may keep actual inflation lower, all else equal, making it more difficult for the Fed to return inflation to target."

Bullard is the third Fed voting official that has spoken this week. On Tuesday, Fed Vice Chairman Stanley Fischer said the U.S. unemployment rate is nearing its natural rate and that the central bank is still conducting expansionary monetary policy.

Boston Fed President Eric Rosengren said Wednesday that U.S. and global economic growth may be diverging and could force the Fed into a more gradual pace of normalization.

William Dudley, the New York Fed President, is scheduled to speak Friday.

— Reuters contributed to this report.