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Federal Reserve

Fed's James Bullard says interest rate policy is 'a little tight' right now

Key Points
  • St. Louis Fed President James Bullard describes rate policy as "a little tight" though he says he's not worried about it for now.
  • Bullard says he is concerned about inflation remaining low and indicates the Fed should "recenter" expectations.

St. Louis Federal Reserve President James Bullard said Friday the central bank's monetary policy now is "a little tight" and may have to be reconsidered.

Speaking at a time when the White House is pushing the Fed to lower rates, Bullard would not commit to that course, but did note the low level of inflation and expectations in financial markets that it will stay that way.

"I think we're a little tight on the funds rate, not too much but a little bit tight," he told CNBC's Steve Liesman during "Squawk on the Street " interview. "I think the global safe real rate in the short term is about zero."

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If the real rate measured against inflation is zero and inflation runs around 2%, then that also should put the Fed's benchmark at 2%, he said. The federal funds rate currently is targeted in a range between 2.25% and 2.5%.

"I would like to take this opportunity to recenter inflation expectations at 2%. I think that would pay handsome dividends for the Fed going forward," Bullard said. "We've made some big moves in monetary policy over the last three or four months. I think it's time to wait and see how that's going to impact the economy going forward."

Indeed, the Fed made a policy pivot in January when it said it will be "patient" about implementing changes to monetary policy. The central bank advanced that position in March when it changed its rate forecast from two anticipated hikes this year to none.

Still, President Donald Trump has pressured Fed officials to change course and cut rates. He said earlier this week that he would like to see a full percentage point reduction.

"We get advice from all kinds of people, including you and including other politicians," Bullard told Liesman. "We get a lot of input from a lot of different angles."