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The President of the St. Louis Fed, James Bullard, likes the idea of a reduction in the rate of "insurance" of the Federal Reserve.
"You take out insurance, if nothing happens, you get it back," Bullard told CNBC's Steve Liesman on Friday at the Fed's Economic Policy Symposium in Jackson Hole, Wyoming.
"This is always the case with the assurance that you can say," Well, you made these cuts and it turned out that the economy has continued to grow. "It's good, you can just come back and resume the cuts," he said.
The Fed, led by Alan Greenspan, used insurance cuts in 1995 and 1998 to fight the economic downturn and successfully extend the second largest expansion in US history. United. The central bank reduced interest rates three times, a total of 75 basis points, in both periods, against Mexican and Russian default risks and the collapse of the hedge fund. long-term capital.
"I think it's a good model or baseline for what could happen here," Bullard said.
The contraction in the manufacturing industry and the US-China trade war are weighing on global growth, Bullard said.
"There is a risk of loss, and I think you would like to purchase insurance against this risk of loss and would like to purchase more insurance," Bullard said. "We can resume insurance next year if it turns out that all of this is going to collapse."
Bullard, a voting member of the Federal Open Market Committee this year, also said the Fed should cut rates because the inverted rate curve is "not a good place to be."
The main yield curve of the bond market briefly reversed for the third time in less than two weeks on Thursday.
– Yun Li from CNBC contributed to this report.
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