Fed’s Bullard Tells Bloomberg TV March Rate Cut Isn’t a Done Deal


Federal Reserve Bank of St. Louis President James Bullard said Wednesday market participants shouldn’t be so certain the central bank will lower rates again at its policy meeting later this month.

Mr. Bullard, speaking on Bloomberg Television, took stock of what the Fed’s emergency rate cut of a half-percentage point on Tuesday meant for the monetary-policy outlook. When it came to lowering rates to help protect the U.S. economy from risks related to the coronavirus epidemic, Mr. Bullard said “we were probably going to have to move at the March meeting anyway, so why not move that up and do it sooner?”

The Federal Reserve cut interest rates by half a percentage point Tuesday in an effort to stem the economic impact of the coronavirus. WSJ’s Justin Lahart explains why the central bank can support the economy in the fight against coronavirus but can’t lead it. Photo: Andrew Harrer/Bloomberg

“We got the policy rate to the right place for now,” and “we took out some insurance against the possibility [the coronavirus and its impact] will cause a growth slowdown in the U.S.”

The Fed lowered the federal-funds target rate to between 1.00% and 1.25%. In its statement it explained “the fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity.” Financial markets had been widely expecting a rate cut, and they anticipate more easing from the central bank.

But Mr. Bullard, who currently isn’t a voting member of the rate-setting Federal Open Market Committee, tempered that line of thinking.

“I wouldn’t want to put a tremendous amount of focus on this March meeting. There won’t be a lot of new information there that we don’t have today,” Mr. Bullard said. He added that the Fed already has shown it can change rates whenever it wants, so it has room to react to rapidly moving events. The FOMC next meets on March 17-18.

Even as Mr. Bullard tried to lower expectations for the outcome of the next FOMC meeting, a number of banks said Wednesday they see the central bank moving again, and soon. J.P. Morgan economist Michael Feroli said he expects a quarter-percentage-point rate cut later this month, noting “while it is far too early to measure the economic fallout from COVID-19, it could well be that this week’s actions would prove to be too little.”

Standard Chartered Bank economist Steve Englander sees rate cuts in March and April. “In the past, the Fed pattern has been to generally follow up intermeeting easing with big cuts at the subsequent meeting, but this time we think it will slow somewhat” and pursue more modest rate cuts, he said.

Mr. Bullard was one of a clutch of Fed officials who had cast some doubt on the need for rate cuts ahead of Tuesday’s action. He said on Friday “further policy rate cuts are a possibility if a global pandemic actually develops with health effects approaching the scale of ordinary influenza, but this is not the baseline case at this time.”

At the news conference that followed the surprise rate cut, Chairman Jerome Powell was asked why the Fed had moved after officials like Mr. Bullard and others suggested no action was imminent.

“So what changed really was, I would say over the course of the last couple weeks, we have seen a broader spread of the virus, we have seen it begin to spread a bit here in the United States,” Mr. Powell said. “We saw a risk to the outlook for the economy and chose to act.”

Several Fed officials are scheduled to speak over the next few days. On Friday, New York Fed Persident John Williams as well as the leaders of the Boston, Cleveland, and Chicago Fed banks are set to appear at a conference in New York and may offer their own outlooks for monetary policy.

Write to Michael S. Derby at [email protected]

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