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Fed's policy stance too hawkish, rate rises should stop: Bullard

Kitco News

(Reuters) - St. Louis Federal Reserve Bank President James Bullard said on Thursday that inflation expectations suggest the U.S. central bank’s policy stance “might be too hawkish,” adding that the Fed should heed market signals and stop raising interest rates.

The Fed should also be careful not to get so aggressive on interest rates that it inverts the yield curve, which in the past has been a good indication of a coming recession, said Bullard, who is a voting member of the Fed’s policy panel this year.

The Fed needs to take signals from markets seriously, he said, adding that “The market’s almost always right in that situation, and it’s the Fed that’s been wrong.”

Though the central bank has taken the opportunity of upside surprises in economic data to normalize rates over the last two years, he said, “the window of opportunity for raising the policy coming to a close.”

Bullard, who has been a consistent voice against interest rate increases for most of the three years the Fed has been delivering them, said he is concerned what has been a moderate slowdown in global growth could worsen.

While trade tensions between the U.S. and China and other trading partners may be inhibiting domestic business spending, the uncertainty and “angst” may be even more intense overseas, he said. That may be connected to the global growth slowdown, he said.

Reporting by Ann Saphir; Editing by Chizu Nomiyama

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