Jun 4, 2019

Fed gives first sign it may cut interest rates

Dion Rabouin, author of Markets

St. Louis Fed President James Bullard issued the opening salvo in the Fed's capitulation to the market on Monday, saying an interest rate cut "may be warranted soon."

What he said: Bullard, a voter this year on the Fed's rate-setting committee, cited the rising risk of global trade tensions and weaker-than-expected inflation as reasons he could favor cutting U.S. overnight interest rates.

  • Lowering rates soon could "help recenter inflation and inflation expectations," he said. It could also "provide some insurance in case of a sharper-than-expected slowdown."
  • The Fed "faces an economy that is expected to grow more slowly going forward, with some risk that the slowdown could be sharper than expected due to ongoing global trade regime uncertainty," Bullard said, according to a transcript of his speech in Chicago.

What he didn't say: Ignoring commentary from Fed Chair Jerome Powell and other FOMC policymakers so far this year who insist the Fed plans to hold rates steady, the bond market and Fed fund futures have been pricing in multiple rate cuts by year-end.

Between the lines: If the Fed does cut rates this year — some analysts predict it will be as early as September — it would add further fuel to the fire of Fed critics who say the stock market is dictating U.S. monetary policy.

Flashback: The Fed had signaled it planned to raise U.S. interest rates 3 times this year as recently as November.

Go deeper: Fed leaves rates on hold as political pressure ramps up

Go deeper

Updated 31 mins ago - Politics & Policy

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Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 3 p.m. ET: 6,703,686 — Total deaths: 393,393 — Total recoveries — 2,906,748Map.
  2. U.S.: Total confirmed cases as of 3 p.m. ET: 1,885,197 — Total deaths: 108,708 — Total recoveries: 485,002 — Total tested: 18,680,529Map.
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  5. Jobs: Better-than-expected jobs report boosts stock market.
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Heiko Maas. Photo: Michael Kappeler/picture alliance via Getty Images

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Why it matters: Israeli and European officials agree that if Israel goes ahead with unilateral annexation, the EU will respond with sanctions.

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A memorial for George Floyd at the site of his death in Minneapolis. Photo: Steel Brooks/Anadolu Agency via Getty Images

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Why it matters: The agreement between the city and the Minnesota Department of Human Rights, which has launched an investigation into Floyd's death while in police custody, will be enforceable in court.