WASHINGTON (Reuters) – Rapid increases in U.S. interest rates have raised the risk of a recession, but St. Louis Federal Reserve President James Bullard said that it is more likely to be caused by an external shock than by a collapse in the still-resilient U.S. economy. Tuesday.
“Anytime you try…to control inflation in the US without causing a dangerous deflation,” Bullard said at an economic forum in London, referring to the path the Fed is trying to take.
But with strong US job growth and strong household balance sheets, he said, “talk about the recession story should be more on a global basis than on a US basis,” with Europe and China potentially drawing the rest of the world into the downturn. .
Bullard, who has been among the most hawkish Fed policymakers in encouraging faster and greater interest rate increases, said he now believes the Fed’s plans to raise its target policy rate to around 4.5% by the end of this year have pushed US monetary policy into a “constrained” that It would slow the economy and ease inflation.
Bullard said these high rates should be maintained “for some time,” a fact that has led to rapid repricing of financial assets in recent weeks and raised concerns that Fed policy is increasing risks to the global economy.
“We certainly are internalizing the spillovers” of Fed policy, Bullard said. But as with his colleagues, he said that was focused on how events in other countries affect the outlook for the US economy.