The Federal Reserve has long served as a pillar of economic stability in the United States. In recent months, it has been making waves by slowly increasing the interest rates in response to the strengthening economy. However, this policy has come under certain criticism from both sides of the aisle.
A recent development from the Federal Reserve could bring some much needed clarity to the situation. St. Louis Federal Reserve Bank President James Bullard recently stated that he is in favor of the policy of keeping the rates low, due to the uncertain future of the economy.
Bullard’s opinion is no small thing, given his role as the President of one of America’s twelve Federal Reserve banks. This means that he has direct access to the Federal Open Market Committee, which is responsible for setting the Federal Funds rate—the rate banks use to lend to each other overnight.
Bullard stated that despite the potentially positive economic growth that an increase in interest rates could bring, it might be too soon to move aggressively. He believes that it is important to proceed cautiously, as the economic picture is still unclear.
The Federal Reserve will likely continue to proceed carefully with any potential changes to the federal funds rate given Bullard’s opinion. Having the St. Louis Fed leader on board with this policy is a huge advantage for the Fed in establishing a stable economic climate.
Bullard’s cautious view could ultimately prove beneficial for consumers. With interest rates still low, it gives households more access to money to use for investments or to pay off high-interest debt.
What remains to be seen is how Bullard’s statements will influence the stance of other Federal Reserve officials. Given his vantage point, his opinion is highly valued and could sway policy decisions in one direction or another. For now, the market will monitor the situation closely and see how it plays out.
