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Fed Members Leaning Away From Interest Rate Increases


With your money briefing, im char Waylon at the Wall Street Journal in New York a journal reporter who covers the Federal Reserve got a one on one interview with FOMC member James Bullard, you'll hear why Wall Street likes would Bullard had to say that's next. I these money and market stories. You should know the Wall Street Journal real estate bureau reports onto townhouses in New York City's Harlem neighborhood, asking a record twenty seven million dollars, the two homes, which are nine thousand square feet each could be combined into one mega mansion, the two houses were formerly members of the white mansion named for John. Dwight the founder of the company that created Armand hammer baking soda the journal also reports on the growing conflict over college debt intensifying among American families tuition increases have outpaced household incomes. Just as parents are facing myriad financial obligations including supporting their own parents saving for retirement health. Care costs. And sometimes they're adult children's living expenses a recent Sallie Mae survey says that parents currently saving for their children's college. Believe they'll be able to cover thirty seven percent of the cost from savings, but parents were paying for children already in college actually cover just ten percent from savings while there's plenty of reporting on college loan programs and grants for low income students. Oftentimes forgotten is the number of college students who struggle to buy food. A study by the government accountability office says that about two million students on college campuses may be going hungry and do not have access to or not familiar with resources like food stamps, and that could be forcing them to leave college without graduating the first ever study of its kind says more than half of college students who list risk factors for what is known as food insecurity did not participate in assistance programs and as of September of two thousand eighteen more than six hundred fifty colleges have or plan to launch food pantries. For students. As recently as November. The Federal Reserve is expected to raise interest rates as many as four times this year. But in light of stock market volatility in wavering. Economic indicators that's been dialed back to two but his to too many it is in the eyes of at least one voter on the Federal Open Market committee and Wall Street Journal reporter Michael gerbil on the line with us with details. So Michael you spoke with James Bullard. He's the chairman of the Saint Louis fed. He has a voting role on the FOMC, and he feels in terms of interest rates the status quo so far is just fine. Yeah. Mr. Bullard has long actually for several years arguing against interest-rate rises, believing that if there's not that much inflation pressure in the economy, and basically the overall inflation gauge is show that inflation's been at best at the feds two percent target, but mostly below it. There's basically he hasn't really seen any justification for for raising rates. And so what happened is what he fears. Now, if the fed does go for with more interest. Rate rises. He's worried that that might actually be the thing that you know, he doesn't specify how many rate rises it would need to be. But he's worried that continuing to do interest rate increases could actually send the economy into recession. And what's been interesting about where Mr. Bullard is because the United I suggest that he's been opposed to these Ray rice for longtime over the last few days number of fed officials have shifted in his direction and that caution that you you know, that that uncertainty about the outlook Luda to in your opening that's caused a whole bunch of fed officials to also go and say like, hey, maybe it's time to be patient. We have the collective assessment is for to rate rises this year. But now you see fed officials saying we've got a while to take stock of things. See if the Mark of us, right? See if our view is right. So another fed official who had been actually fairly hawkish on Boston fed leader, Eric Rosengren, he for quite some time. He talked about how he wanted more interest rate rises than all of his colleagues even today in his speech today. He backed off and said we have time to be patient and take stock before we do anything else. We'll if you're on Wall Street or an investor the cautious track at least in the eyes of two of the FOMC members the cautious track. They like to see the fed take going forward. Well, that's got to be good news. And there's even another fed official Chicago fed president Charles Evans, who's also getting a voting role in the FOMC to sheer like, Mr. Rosengren, Mr Evans has been pretty hawkish for for quite a while about monetary policy. And he also reiterated the message that we have nothing that is pushing us to do anything right now. So let's just be patient and take stock before we decide whether or not we need to raise rates again. Bottom line for Mr. Rosengren for Mr Evans, they still remained fairly optimistic about the outlook in they still do think at some point. They do seem to lean that the feds can be able to do it. There's a very interesting note in your story from your in view with Bullard. And is he feels the market has been more accurate in predicting the track the economy than the fed Mr. Bullard is consistently placed a lot of emphasis on market based indicators of the. To me, you know, when he's trying to look forward and figure out what the economy's gonna do. There's all sorts of different ways you can do that. You can look at surveys that economists have made all sorts of things like that will what Mr. Buller likes to do is look at what markets are pricing for in the future when he looks. When he tries to get a sense of whether or not people think inflation's gonna go down. He looks to inflation expectations data from the markets. And so he's pointed out that, you know, we've had a lot of points over the last few years where markets and the fed have had pretty diversion outlooks for the future. And you know, eventually those things have to reconcile. But he's saying that over time over the last, you know, a good number of years. It's the fed view. It's I'm sorry. It's the Marcus view on what monetary policy will do that is actually proven to be more accurate and right now, we have financial market said expect no rate rises and even at various points. Even priced in fed rate cuts, you know, somewhere out in in the later year. And Jim sorry. Mr. Buller would like like his colleague. To pay more attention to what the market is telling them and the FOMC members, of course, have a vote, and we see the vote count. When the when the fed announces interest rate moves, but what is the relationship between the FOMC members, and the fed chairman in this case Jerome Powell in terms of the sway that they have short of a vote. They're sentiment. Does that typically have a lot of sway within the within the fed offices? Well, we always know when we when we take stock of this all fit officials contribute in FOMC deliberation. So whether or not you have a vote, you still get to make your piece and say say what you want to say about what you think monetary monetary policy should do the, but the voting role does sort of shine a spotlight on the people that have it so win every year when the new, you know, it's a it's a complicated dynamic determines who gets vote. But when the new classes rotates in it to shines a spotlight on those people's views, and you know in it does it's. Another thing for the chairman to manage as the chairman is trying to forge a consensus about monetary policy, and at the fed in particular, having a consensus view on changing monetary policy based on like a broad consensus is important. So, you know, there've been times when we've seen lots of dissent specially during the financial crisis. But that's a pretty rare thing to see on the at the fed. So when you see all the voters tilting in a certain way, it does help add a little extra emphasis on the idea that that might actually be the way that the fed goes. And then aside from interest rates Bullard said the fed should maintain its balance sheet reduction plan, he also made the point that I didn't put it in a story. Just because there's only so much you can put in a story that he never wanted the fed to be doing what it's doing right now with the sort of automatic roll off of its balance sheet. He actually always preferred more dynamic than where the fed which change the place of runoff much like it changes short-term interest rates, but he knowledge is he didn't win that debate for now he thinks that just keeping things on. Autopilot on. It's what people expect it's not an issue. So he'd like to from what I've seen almost all of his colleagues right now would like to keep the balance sheet runoff on autopilot. I suppose an effort not to added additional complication to an already pretty complex landscape that is Wall Street Journal reporter, Michael derby, you can read all about his interview with James Bullard in his story on wsJcom or the WSJ app. A Michael thanks for being with us. Thank you for having me every sheet it, and that's your money briefing, im chair Whalen in New York for the Wall Street Journal.

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