The Fed: Feds Bullard: Sharper-than-expected Economic Slowdown Is Key Risk

Author photo

By

Senior economics reporter

St. Louis Fed President James Bullard welcomed the return of the positive slope to the yield curve.

The “key risk” facing the U.S. economy is a sharper-than-expected slowdown, despite the Fed’s recent interest-rate easing, said St. Louis Fed President James Bullard Thursday.

“It remains possible that a sharper-than-expected slowdown could materialize in the quarters ahead,” Bullard said, in a speech to the Rotary Club of Louisville.

Bullard said the U.S. economy has already been slowing down this year after relatively rapid growth over 2017 and 2018.

Downside risk may cause the slowdown to intensify, he said.

Bullard has been one of the most dovish regional Fed presidents, urging the Fed to start easing aggressively.

The Fed has tried to help insure against this downside risk by dramatically altering the path of interest rates this year, he said. The three rate cuts from July-October may help foster somewhat faster growth next year, he said.

Earlier Thursday, Fed Chairman Jerome Powell told a congressional committee he didn’t see signs of a recession.

“The U.S. economy is in a very strong position. I think the outlook is a very positive one,” Powell told the House Budget Committee.

Read: Powell: Weakness in manufacturing not spilling over into broader economy

Bullard repeated that he thinks trade uncertainty could last “for years.” This creates a disincentive for global investment and, accordingly, the global growth environment looks weaker in recent quarters.

This slower growth may feed back into slower growth in the U.S., he said.

The St. Louis Fed president said that key measures of the U.S. Treasury yield curve have now returned to a positive slope.

“This return to a more normal state of affairs may be a bullish factor for 2020,” he said.

Stocks were lower Thursday with the S&P 500 SPX, -0.05%  index down 7.4 points to 3,086.

RECENT NEWS

Market Optimism As S&P500 Briefly Peaks Amid Falling Inflation

The S&P500 index saw a brief all-time high as new data revealed a drop in America's annual inflation rate to 3.4% in... Read more

Sony's Strategic Share Buyback: Impact On Stock Performance

In a bold move signaling confidence in its financial stability and future growth prospects, Sony recently announced a si... Read more

The Hidden Costs Of Investing In BDCs

Business Development Companies (BDCs) are often lauded for their attractive yields, appealing to investors seeking subst... Read more

The Case For Hedging Foreign Exchange Exposure Amidst Economic Divergence

In today's global economy, characterized by increasing economic divergence among major nations, investors face a dauntin... Read more

ETF Market Update: Assessing The Impact Of Receding US Rate Cut Expectations

The ETF market has been subject to significant shifts in recent months, with one of the key drivers being the evolving e... Read more

Market Response: Understanding The Drop In Arm Shares

In the fast-paced world of technology, market reactions can serve as barometers of industry health and company performan... Read more