US Federal Reserve should keep interest rates at their current levels until it sees inflation rise

James BullardThe US Federal Reserve should keep interest rates at their current levels until it sees inflation rise, according to the chairman of the Fed for St Louis, James Bullard.

“The inflation data in 2017 surprisingly unpleasant and question the idea that inflation is actually returning to target levels”, said Bullard in a speech in Louisville, Kentucky. In his words, even if the Fed succeeds in returning inflation to the target of 2%, it is unlikely to happen before 2018 or 2019.

The US central bank raised interest rates twice this year, and looks set to raise rates in December, despite weak inflation. Bullard has repeatedly said that rising interest rates in such an environment risked harming the economy.

The Fed’s favorite measure of inflation, the consumer price index for personal consumption (PCE), is at 1.3% on an annual basis, which for more than 5 years is below the target of 2%.

Bullard will again be entitled to vote at the Federal Monetary Policy Committee in 2019. He expects the economic growth in the second half of 2017 to exceed expectations, but then to slow down.