St. Louis Federal Reserve President James Bullard said Friday the central bank should continue to ease monetary policy because of the recession signal being flashed by the bond market.
“The yield curve is inverted here. We’ve got one of the higher rates on the yield curve here. That’s not a good place to be,” Bullard told CNBC’s Steve Liesman.
The so-called yield-curve inversion refers to the 10-year Treasury yield trading below its 2-year counterpart. This briefly happened earlier this week and last week. Experts fear a yield-curve inversion because it has historically preceded a recession.
These moves in the bond market come as economic growth across the globe is slowing down while the China and the U.S. remain engaged in a trade war. There is concern that slower global growth and the trade war could drag down the U.S. economy.
The Fed already cut rates in July by 25 basis points, citing “global developments” and “muted inflation.” Bullard said further cuts would help lift inflation in the U.S., adding the Fed should “take out the insurance. “
His comments come ahead of a speech from Fed Chairman Jerome Powell. Bullard is a voting member of the Federal Open Market Committee this year.
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