Bullard says Fed may need to tighten ‘sooner rather than later’ FOMC closer to goals than during most of the past 50 years Policy far from normal even as economy near FOMC goals Labor force participation may fall further There was a momentary uptick in bonds and USD/JPY on the headlines but it was quickly wiped out. These are comments Bullard has made before.
From Goldman Sachs latest ‘The Global FX Analyst’ client note (at a hefty 71 pages that’s one helluva note). Major FX views (in brief): Still USD bulls – four major drivers – interest rate differentials, shifts in the oil balance in the US, safe haven demand and reserve recycling The ECB has eased, pushing the Euro weaker – we have changed our 3-month EUR/USD forecast to 1.35 from 1.38.
Fed is closer than many think to reaching goals on jobs and inflation Would be willing to tolerate temporary inflation rise above 2% goal Fed is at risk of keeping policy loose for too long Increasingly concerned about risks of current fed policy Fed should let balance sheet shrinking in October Dangerous to think that Fed can always tighten policy if if overshoots on employment goal We are experiencing financial excess of our own making Fed risks damaging economy by appearing politically pliant His views are increasingly at odds with some Fed colleagues Dallas Fed’s Richard Fisher exercising his hawkish wings quite strongly.