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By Howard Schneider
(Reuters) – The US Federal Reserve's interest rate hike in December likely shifted monetary policy into a restrictive framework likely to push the economy farther away from one's own. key objectives of the Fed, said James Bullard, president of the Federal Reserve Bank of St. Louis on Thursday.
Bullard, in a statement to the press after an appearance at St. Cloud State University in Minnesota, said that, corrected for inflation, he now considered the federal funds rate as "somewhat restrictive".
"We are exerting downward pressure rather than upward pressure on inflation, which risks moving away from the Fed's 2% target," said Bullard.
Bullard said he expects the Fed to no longer achieve this inflation target in 2019, a problem that now continues, he says, undermining the credibility of the central bank.
The good trajectory of interest rates and the correct badessment of policies have been the subject of intense discussions in recent months, as the Fed aimed to raise rates to a "neutral" level after a decade of low interest rates expected to stimulate growth. 'economy.
Bullard is the first Fed official to suggest that the central bank has exceeded expectations due to a rise in interest rates that occurred in December, which could well be a drag on growth – and price rise rate – even if it is the case. not the intention of.
Bullard said, "I think it hurt us not to miss the lowest possible level," Bullard said.
Bullard, which is voting on the interest rate policy this year in its speech at St. Cloud State, said the Fed should "act cautiously" this year in its decisions.
The Fed raised rates four times last year, but now seems to be hanging in the current range of 2.25% to 2.5%.
Compared to the 2% target, the Fed's preferred inflation measure is on average about 1.6% since 2012, roughly what some securities are protected against. Inflation indicate as being the expected level in the coming years.
For most of last year, Fed officials have estimated that the years of "accommodative" policies have finally helped to boost inflation and almost lift it. Achieving or exceeding the targeted inflation level is a fundamental goal of policymakers, who consider low but steady price increases as a sign of economic health and that it is important to keep wages and investments on track. the right path.
(Report by Howard Schneider, edited by Leslie Adler)
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